This is a recent ITAT Mumbai ruling from September 2026 that settles an important question: what happens when you disclose old jewelry for the first time in Schedule AL, and the department treats it as unexplained income under Section 69A?

Background

Anjani Parikh sold her 1/3rd share in a property at Juhu, Vile Parle West, Mumbai in January 2021 for around Rs. 35.33 crore. She filed her return reporting a long-term capital gain and claimed deductions under Section 54 and Section 54EC.

Since her income crossed Rs. 50 lakh for the first time that year, she was required to disclose her assets and liabilities in Schedule AL. She disclosed jewelry worth Rs. 67,39,949.

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This jewelry had two components:

• Ancestral jewelry inherited from her late father-in-law, mother-in-law, and their HUF, distributed among legal heirs around 2015 after a decades-long family dispute. Her share came to Rs. 46,94,547.
• Self-owned jewelry (stridhan) worth Rs. 20,45,402, which had been reported in her own Wealth Tax return back in AY 1997-98.

What the Tax Department said

The Assessing Officer asked for bills, vouchers, and bank statements to prove where the jewelry came from.

Since the jewelry was decades old, those documents were not available. The AO then drew an inference:

• Assessee had not filed a Wealth Tax return after AY 1997-98
• This means her taxable wealth must have fallen below the threshold
• Which means the jewelry must have been sold off before the year under review
• Therefore, the entire Rs. 67,39,949 is unexplained and taxable under Section 69A

The CIT(A) upheld this reasoning at the first appeal stage.

What the taxpayer argued

The assessee submitted a detailed documentary trail covering nearly three decades:

• Valuation report dated 31.03.1989 of the jewelry belonging to her late father-in-law and mother-in-law
• Wealth Tax return for AY 1997-98 disclosing self-owned jewelry of Rs. 19,55,105
• Wealth Tax workings for AY 2014-15 of the ancestral estates and HUF
• A declaration dated December 2022 signed by the eldest legal heir and counter-signed by all others confirming the 2015 family distribution
• A registered valuer's report from December 2022 certifying physical verification, no material change in quantity, with photographs attached

The argument was straightforward: you cannot tax jewelry as unexplained income merely because original purchase bills are not available, when decades of independent records establish both ownership and lineage.

What the court decided

The ITAT rejected the department's chain of inference entirely.

On the non-filing of Wealth Tax returns: not filing a return after AY 1997-98 only means taxable wealth was below the threshold. It does not mean a specific item of jewelry was sold. For that conclusion, the department needed independent evidence of a sale or receipt of sale proceeds. No such evidence existed.

On the absence of purchase bills: Section 69A requires that the assessee offers no explanation, or an unsatisfactory one. Where the explanation is backed by a consistent documentary record spanning decades, an addition cannot be sustained on suspicion alone.

The ITAT relied on three Supreme Court rulings from the 1950s that establish the same principle: suspicion, however strong, cannot replace proof.

The entire addition of Rs. 67,39,949 was deleted.

On the second issue involving brokerage of Rs. 12 lakh paid to Ajit Rao HUF as part of the Section 54 reinvestment cost, the Tribunal ruled against the assessee. The Karta of that HUF had already been separately paid Rs. 12 lakh in his individual capacity for the same transaction. Since brokerage is a personal service and the same individual had already been fully compensated, the additional payment routed through the HUF was treated as gratuitous. That disallowance was upheld.

Key takeaway

If you are disclosing jewelry in Schedule AL for the first time because your income crossed Rs. 50 lakh, the department can question the source. But the standard is not about producing 30-year-old bills. What matters is whether you can establish ownership and lineage through consistent historical records.

Wealth Tax returns, valuation reports, family settlement documents, and a registered valuer's physical verification can together be sufficient. The department cannot assume a sale simply because you stopped filing Wealth Tax returns.

On the HUF brokerage point: paying the same person twice for the same service, once individually and once through his HUF, will not hold up. The second payment will be disallowed.

This is a recent ITAT Delhi ruling from September 2026 that highlights a frustrating but important situation. The assessee was right, the officer knew he was right, and still denied the correction. Here is what happened.

Background

Ajay Kumar Bakaya, a resident senior citizen, had invested ₹3 crore in tax-free bonds back in February 2013.

IIFCL 8.48% Tax Free Bonds: ₹2 crore
REC 8.46% Tax Free Bonds: ₹1 crore

Interest on both these bonds is fully exempt under Section 10(15)(iv)(h) of the Income Tax Act.

For AY 2022-23, he earned ₹25.42 lakh as interest on these bonds. But by mistake, this exempt income was entered under "Income from Other Sources" as taxable income. He paid ₹9.91 lakh extra tax as a result.

To be clear, he had correctly shown this income as exempt in six other assessment years. This was a one-year filing error.

What the Tax Department said

By the time the assessee noticed the mistake, the deadline to file a revised return had already passed.

He filed a rectification application under Section 154, asking for the correction and a refund of ₹9.91 lakh.

The Assessing Officer rejected the application. The reason given was that a new claim for deduction cannot be made through a rectification application. Only a revised return would have been the correct route, and that window had closed.

The AO cited the Supreme Court's Goetze (India) Ltd. judgment to support this position.

The CIT(Appeals) also upheld the rejection.

What made this more problematic: the AO's own order clearly stated that the interest income "was erroneously added as taxable income while filing the tax return." He acknowledged the mistake but still refused to correct it.

What the taxpayer argued

The assessee made three key arguments before ITAT.

First, this was not a fresh claim. The bonds and the interest income were already disclosed in the original return. The only error was placing exempt income in the wrong column. That is a correction of an apparent mistake, not a new deduction claim.

Second, Goetze (India) Ltd. does not apply here. That ruling restricts Assessing Officers from entertaining fresh claims not made in the return. It does not restrict appellate authorities. ITAT has full power to consider such corrections.

Third, Article 265 of the Constitution says no tax can be collected except by authority of law. CBDT Circular No. 14 of 1955 also places a duty on tax authorities to help taxpayers claim legitimate reliefs, not deny them on technical grounds.

What the court decided

ITAT Delhi allowed the appeal in full.

The Tribunal held that this was a clear mistake apparent from the record, not a fresh claim. The AO had already acknowledged this in writing.

It relied on the coordinate bench ruling in Kapil Dev Nikhanj (2025), which clarified that Goetze (India) Ltd. only limits AOs and not appellate authorities. The correct amount of tax must be collected from the right person as per law. Revenue cannot benefit from a taxpayer's inadvertent error when the statute specifically exempts that income.

ITAT directed the AO to treat ₹25.42 lakh as exempt under Section 10(15)(iv)(h) and refund ₹9.91 lakh along with applicable interest.

Key takeaway

If you miss the revised return deadline, a Section 154 rectification can still work, but only when the error is clear from the record itself.

An AO rejecting such a correction, even after acknowledging the mistake, is not the end of the road. ITAT has full power to step in.

Goetze (India) Ltd. is often misapplied. It restricts AOs, not appellate tribunals. This distinction matters.

And practically: always double-check which column your exempt income goes into before filing. A wrong column entry can cost you a refund for years.

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This is a recent ITAT Chennai case that settles an important question for online gamers who ended up losing money net-net but still received a massive tax demand.

Background

Srither, a taxpayer from Virudhunagar, Tamil Nadu, played online games on Gameskraft Technologies during FY 2021-22.

Gross winnings credited to his gaming wallet: Rs. 2,44,50,134

Total buy-in amounts paid to play: Rs. 2,74,96,660

Net result: A loss of Rs. 30,56,491

Despite the actual loss, the tax department received information from Gameskraft showing gross winnings of Rs. 2,44,64,534. The AO treated this entire amount as taxable income under Section 115BB and made a large addition. The CIT(A) confirmed this view.

What the Tax Department said

The department took a straightforward position.

Gameskraft reported gross winnings of over Rs. 2.44 crore flowing into the assessee's wallet

This entire amount was added as income from other sources

No deduction for buy-in costs was allowed since Section 58(4) bars expenditure deductions against gaming winnings

The CIT(A) agreed, holding that Section 115BB covered online games and that the new Section 115BBJ introduced in 2023 did not imply online games were untaxed before

What the taxpayer argued

The assessee's lawyer made two arguments, one primary and one fallback.

Primary argument: Online gaming involves skill, not chance. Citing a Madras High Court ruling in GR Karthikeyan, the argument was that winnings from skill-based activities fall outside Section 2(24)(ix) entirely

Fallback argument: Even if taxable, only real net winnings should be taxed. Gameskraft's own records showed buy-ins of Rs. 2.74 crore against gross credits of Rs. 2.44 crore, resulting in an actual loss. Taxing gross wallet credits ignores the basic concept of income.

The assessee also pointed to an earlier Bengaluru ITAT ruling involving the same platform and same assessment year, which had taken the same net-income view.

What the court decided

The Tribunal rejected the primary argument. The Supreme Court had already overruled the Madras High Court in GR Karthikeyan, holding that skill-based winnings are still taxable income.

However, on the real income question, the Tribunal sided with the assessee.

The ITAT held that every credit into a gaming wallet is not income. Repeated circulation of funds, buy-ins, and redeployment of winnings in subsequent rounds do not themselves constitute taxable receipts.

The Finance Act 2023 provisions introducing Section 115BBJ and 194BA, which explicitly tax only net winnings, were held to be clarificatory, not a new principle. They codified what was always the correct interpretation of income under the Act.

Earlier horse racing decisions from the Kolkata and Delhi benches, which allowed netting of buy-in costs against winnings, were applied by analogy to online gaming.

The Tribunal noted that Gameskraft itself had not deducted any TDS, which supports the assessee's position that there were no net winnings at all.

The AO's addition of Rs. 2,44,50,134 was directed to be deleted in full.

A similar view had also been taken by the Hyderabad ITAT in a case involving the same platform for the same year.

Final outcome

Appeal allowed

Addition of Rs. 2,44,50,134 deleted

Only real net winnings from online gaming are taxable, not gross wallet credits

Key takeaway

If you played on platforms like Gameskraft and your total buy-ins exceeded your total winnings, the net loss position means there is no taxable income.

The tax department cannot pick only the gross credits from the gaming platform's data while ignoring the corresponding buy-in amounts from the same records.

The 2023 amendments formalized the net-winnings principle. But as this ruling makes clear, the principle applied even before those amendments came in.

The PF wage ceiling has been raised from ₹15,000 to ₹25,000 per month, effective 17 September 2026. If you earn between these two numbers, your take-home pay may drop slightly starting from your next payslip.

Here is what changed and what it means for you.

Background

The government has revised the EPFO wage ceiling, which is the base on which PF contributions are calculated.

Earlier ceiling: ₹15,000 per month
New ceiling: ₹25,000 per month
Effective date: 17 September 2026

This is not your total CTC. PF wages are the statutory wage base applicable under EPFO rules.

Employees in covered establishments earning above ₹15,000 and up to ₹25,000 now come under mandatory EPFO coverage.

The government expects over 51 lakh additional workers to be brought under the system.

What has changed in your deductions

The contribution rate has not changed. It remains 12% for both employee and employer.

What has changed is the base on which that 12% is applied.

At ₹15,000 ceiling: 12% = ₹1,800 per month deduction
At ₹25,000 ceiling: 12% = ₹3,000 per month deduction
Difference: ₹1,200 per month

But not everyone will see exactly ₹1,200 less. It depends on your actual PF wages.

Example: If your PF wage is ₹20,000, your earlier capped deduction was ₹1,800. Now it becomes ₹2,400. That is a difference of ₹600, not ₹1,200.

If you were already contributing on your full PF wages and those wages exceed ₹25,000, your employee deduction may stay unchanged.

Where does the extra money go

At ₹25,000 PF wages, for an eligible EPS member:

Your EPF contribution: ₹3,000 per month
Employer's EPF share: around ₹917 per month
Total EPF credit: around ₹3,917 per month

Separately, the employer contributes around ₹2,083 per month toward EPS, which is the pension scheme.

Over a full year, the extra ₹1,200 per month in employee contribution adds up to ₹14,400 going into your retirement corpus.

What about insurance

Employees newly brought under EPFO coverage also become eligible for EDLI, which is the group insurance benefit under EPFO.

Maximum insurance payout under EDLI: ₹7 lakh

The higher wage ceiling does not increase this maximum. The actual amount payable depends on the scheme rules.

What you should do now

Check your next payslip for three things:

Your PF wage base
Your employee PF deduction amount
The employer EPF and EPS split

Cross-check your EPFO passbook to confirm that credits are reflecting correctly.

If anything looks off, confirm the revised deduction with your HR or payroll team.

Key takeaway

The PF contribution rate has not changed. Only the wage ceiling has gone up.

If your PF wages were capped at ₹15,000, you will now see a higher deduction and higher employer contribution toward your EPF and EPS accounts.

Less take-home in the short term, more retirement savings and pension benefits in the long run.

This is a recent ITAT Mumbai ruling from August 2026 that draws a clear line between simply missing income in your return and deliberately hiding it. The difference in penalty rate is massive, and this case explains exactly when each applies.

Background

Tasneem Feroz Nalwalla, a 57-year-old Non-Resident Indian, filed her return for AY 2020-21 declaring a total income of just ₹43,796.

The tax department's Insight Portal flagged that she had received interest income of ₹14,46,321 from ICICI Bank, ICICI Securities, and Kotak Mahindra Bank.

Out of this, ₹14,02,525 was never reported in her return.

The department issued multiple notices. She did not respond to any of them.

The Assessing Officer added the entire ₹14,02,525 as income from other sources and then initiated penalty proceedings under section 270A, treating the case as misreporting.

Penalty levied: ₹4,85,178 at 200% of tax on under-reported income.

What the tax department said

The assessee did not disclose substantial interest income in her original return.

The omission was detected only through third-party information from banks, not through any voluntary disclosure.

Despite receiving multiple notices during reassessment, she did not respond or furnish any explanation.

The department argued this showed deliberate concealment, making it a case of misreporting under section 270A(9), justifying the 200% penalty.

What the taxpayer argued

She was an NRI living outside India during the relevant period and continued to be a Non-Resident until April 2025.

She had entrusted all her tax compliance to an accountant. The omission happened because of the accountant's mistake, not any intent to hide income.

She had limited technological knowledge and was unaware of the electronic notices being issued by the department.

Once she found out about the liability, she paid the full tax of ₹2,42,589 along with interest of ₹3,06,821, totaling ₹5,49,410, on 23 January 2025.

She accepted the tax consequence. The argument was only that this was under-reporting at 50%, not misreporting at 200%.

What the court decided

The Tribunal acknowledged that the omission of ₹14,02,525 was real and the assessee could not escape penalty entirely just because an accountant was responsible.

However, it held that not every case of under-reporting automatically becomes misreporting.

Section 270A draws a clear distinction: 50% penalty for under-reporting, 200% penalty for under-reporting in consequence of misreporting. The higher rate requires the department to independently establish the factual grounds for misreporting under section 270A(9).

The Tribunal considered the full picture: NRI status, reliance on an accountant, limited tech knowledge, non-response to electronic notices in those circumstances, and voluntary payment of full tax and interest after becoming aware.

On weighing all these factors, the Tribunal found the material was not sufficient to sustain a finding of misreporting.

Penalty was reduced from 200% to 50% of tax on under-reported income.

The appeal was partly allowed.

Key takeaway

Under-reporting and misreporting are two different things under section 270A. The 200% penalty is not automatic just because income was missed or even detected by the department through third-party data.

The department has to establish that the specific conditions for misreporting under section 270A(9) are met.

Circumstances like NRI status, dependence on a professional, limited digital access, and subsequent voluntary payment of tax are all relevant factors the Tribunal will consider.

If you are an NRI or have delegated your tax filing to someone else, make sure you have a process to stay informed about notices. Ignorance may reduce the penalty rate in an extreme case, but it will not eliminate the tax and interest.

This is a recent ITAT Mumbai ruling that directly addresses one of the most common real-world dilemmas in Mumbai real estate: what happens when you buy two flats in the same building because adjacent units simply were not available?

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Background

Sunil Indravadan Shah sold six commercial units at Solitaire Chambers, Kalbadevi Road, Mumbai between June and July 2019.

Sale consideration: Rs. 5.32 crore
Long-term capital gain arising: Rs. 4.97 crore

To claim exemption under Section 54F, he reinvested the entire gain by purchasing two residential flats in the same building, 22 Dholera, Parel, Mumbai.

Both flats were in Wing-A of the building:

Flat A-601 (6th floor): Rs. 2.65 crore
Flat A-1801 (18th floor): Rs. 2.65 crore

Both were purchased from the same developer on the same date, with identical area of 1,334 sq. ft. each, and both agreements were registered on the same day.

The total investment was Rs. 5.67 crore, which covered the full capital gain.

What the Tax Department said

The Assessing Officer allowed the Section 54F deduction for one flat but denied it for the second. The reason given was that Section 54F only permits investment in one residential house.

Deduction denied on the second flat: Rs. 2.51 crore

The CIT(Appeals) upheld this disallowance. The reasoning given was:

The two flats were on different floors
Each had a separate entrance
Stamp duty was paid separately for each
Being connected by a common lift does not make them one property

Based on this, the taxable income was revised upward from Rs. 22.92 lakh declared by the assessee to Rs. 2.74 crore assessed by the department.

What the taxpayer argued

The assessee's counsel made several submissions before the Tribunal.

The two flats were purchased as one residential accommodation for the entire family. The assessee's wife was ageing and obese, weighing 116 kg, with restricted movement, which made it essential for the family to stay together.

The original intent was to buy adjacent flats that could be interconnected. But no adjacent units were available in the building at the time of purchase.

In Mumbai, buyers are entirely dependent on builders and approved construction plans. Ground realities leave little choice for a buyer who needs space for the full family.

Both flats were in the same wing, purchased simultaneously, from the same developer, at the same price, with the same area. The only difference was the floor.

The assessee relied on the Delhi High Court judgment in CIT v. Gita Duggal and the Delhi High Court judgment in Pr. CIT v. Lata Goel, where even flats in separate towers had been treated as one residential house for Section 54F purposes.

What the court decided

The ITAT Mumbai ruled in favor of the assessee and set aside the disallowance.

The Tribunal held that the phrase "a residential house" in Section 54F does not mean a single physical unit. Courts have consistently interpreted it based on the substance and functional character of the accommodation, not its technical structure.

The Tribunal noted that the case before it was actually on stronger ground than earlier decisions because both flats were in the same wing, purchased on the same date, from the same developer, with identical area and consideration. The only difference was the floor.

Separate stamp duty and separate entrances do not by themselves prove that two units are two separate houses. The law does not require a residential house to be registered under a single instrument or to be one undivided physical structure.

The disallowance of Rs. 2.51 crore was set aside. The Assessing Officer was directed to allow the full Section 54F deduction.

Key takeaway

Section 54F does not rigidly mean one flat or one physical unit. Courts look at the intent, functional use, and substance of the transaction.

If two flats in the same building are purchased simultaneously, from the same developer, at the same consideration, and intended to be used as one family home, the exemption can cover both.

Separate entrances and separate stamp duty receipts are procedural facts. They do not by themselves disqualify a genuine reinvestment claim.

This is a recent ITAT Jaipur ruling that settles an important question: can the tax department slap a 200% penalty on someone who forgot to file, paid everything voluntarily, and never tried to hide a single rupee?

Background

Abhishubham relocated to the USA in August 2018 to join a multinational company. In the rush of settling into a new country, he missed filing his ITR for AY 2018-19.

When he realized the mistake in August 2019, the window to file a belated return had already closed under the Finance Act 2016.

Here is what he did next:

Paid full self-assessment tax voluntarily in August 2019

Also paid interest and the late filing fee under Section 234F

Did all of this before the Income Tax Department even issued him any notice

The department only sent a notice under Section 148 in March 2022, nearly three years after Abhishubham had already cleared his dues.

In response to the notice, he filed a return declaring income of Rs. 20,49,700, which the department accepted without any changes.

What the tax department said

The Assessing Officer initiated penalty proceedings under Section 270A(9).

The reasoning was:

Since no return was filed under Section 139(1), any income disclosed for the first time in response to a Section 148 notice automatically qualifies as underreported income under Section 270A(2)(b)

Filing for the first time under Section 148 also amounts to misrepresentation or suppression of facts under Section 270A(9)(a)

Based on this, a penalty of Rs. 8,29,034 was levied, which is roughly 200% of the tax on the underreported income.

The CIT(A) upheld this penalty.

What the taxpayer argued

The defense was straightforward.

There was no intent to hide income. The non-filing happened because of relocation to a new country and an overwhelming transition to a new job.

By the time the error was realized, there was no legal provision left to file even a belated return.

Despite having no legal obligation at that point, the assessee voluntarily paid all taxes, interest, and late fees before any proceedings started.

This conduct clearly shows bona fide intent, not evasion.

The assessee also pointed out that he had consistently filed returns on time in all previous years.

What the court decided

ITAT Jaipur ruled in favor of the assessee and deleted the entire penalty of Rs. 8,29,034.

The key findings were:

Section 270A(6)(a) provides that underreported income does not attract penalty if the assessee offers a bona fide explanation and discloses all material facts

The explanation here, which was relocating abroad, missing the deadline, and voluntarily paying everything before any notice, qualified as bona fide

A taxpayer who pays full tax before the department even sends a notice cannot be treated on the same footing as someone who conceals income

Since underreporting did not survive, the charge of misreporting as a consequence of underreporting also fell away automatically

The tribunal also condoned a 49-day delay in filing the appeal, separately, because it was caused by a genuine jurisdictional mismatch on the Income Tax Portal due to an outdated PAN address.

Key takeaway

If you missed filing an ITR but paid all your taxes voluntarily before any notice arrived, that conduct matters.

Section 270A(6) protects taxpayers who have a genuine explanation and clean hands. The department cannot treat an honest oversight the same as deliberate concealment.

The penalty provision under 270A(9) is meant for people who suppress facts to reduce tax liability. It was never designed for someone who paid everything upfront and simply missed a deadline.

If you are in a similar situation and received a penalty notice, this ruling is directly relevant to your case.

This is a recent ITAT Jaipur ruling that every senior citizen and their family should know about. It also sends a clear message to Assessing Officers about what a best judgment assessment can and cannot do.

Background

Amar Devi, an 83-year-old widow from Jaipur, did not file her income tax return for AY 2010-11.

The Assessing Officer received information about a fixed deposit in her name and issued a notice under Section 148 in 2017, reopening the assessment.

She did not respond to any of the notices.

The AO completed the assessment under Section 144 (best judgment) and determined her total income at Rs. 5,15,447 as follows:

• Estimated regular income: Rs. 1,50,000
• Cash deposits in bank account: Rs. 1,06,000
• Deposit through transfer: Rs. 2,42,507
• Interest income: Rs. 16,940

A tax demand was raised. She challenged it before the CIT(A), but again no reply was submitted. The CIT(A) upheld the AO's order. She then appealed to ITAT Jaipur.

What the Tax Department said

The AO's position was based on three additions.

First, a transfer deposit of Rs. 2,42,507 was treated as unexplained income because the assessee did not respond to explain its source.

Second, cash deposits of Rs. 1,06,000 into the bank account were added as unexplained cash.

Third, an ad hoc amount of Rs. 1,50,000 was added as "regular income" without any specific explanation or working provided in the assessment order.

The CIT(A) confirmed all three additions after calling for a remand report from the AO.

What the taxpayer argued

The assessee's advocate placed two documents on record before ITAT.

First, a fixed deposit receipt from Bank of Rajasthan showing that she had made an FD of Rs. 2,00,000 on 14 May 2007, which matured on 14 May 2009 for Rs. 2,46,068.

Second, the bank passbook showing that FD No. 303024 was closed on 29 May 2009 and Rs. 2,41,642 was credited to her account on the same date.

This directly explained the transfer deposit that the AO had treated as unexplained income.

On the cash deposits of Rs. 1,06,000, the advocate pointed to the passbook showing cash withdrawals of Rs. 2,45,000 in the months before the deposits. He argued the cash came back in from those earlier withdrawals, not from any outside source.

On the Rs. 1,50,000 addition, the advocate argued that the AO had made an arbitrary estimate with no material or working to back it up.

What the Tribunal decided

The Tribunal allowed all three grounds and deleted the entire demand.

On the FD proceeds:

• The passbook and FD receipt established a direct link between the maturity proceeds and the credited amount
• The deposit was the assessee's own money, not income for the year
• The addition was made only because she did not respond, not because there was any material suggesting undisclosed income
• Addition of Rs. 2,41,642 deleted

On the cash deposits:

• The passbook showed cash withdrawals of Rs. 2,45,000 before the deposits of Rs. 1,06,000
• In the case of an elderly widow living on family pension, it is reasonable to hold that cash was re-deposited from earlier withdrawals
• Once the assessee explained the source, the burden shifted to the AO to disprove it, which he did not
• Addition of Rs. 1,06,000 deleted

On the regular income addition:

• The AO added Rs. 1,50,000 as regular income without explaining what income this was or how the figure was arrived at
• Even a best judgment assessment under Section 144 does not allow the AO to make arbitrary additions
• The estimate must have a reasonable nexus to the material on record
• Additions based purely on surmise are not permissible in law, as held by the Supreme Court repeatedly
• Addition of Rs. 1,50,000 deleted

Key takeaway

Not filing a return and not responding to notices is a serious mistake. It leads to ex-parte assessments and demands that then have to be fought over years.

But even in a best judgment assessment, the AO cannot add arbitrary amounts. The additions must have some factual or documentary basis.

If the source of a bank credit or cash deposit can be traced back to the taxpayer's own funds, it is not income. Documentary evidence like FD receipts and passbooks can explain these credits even at a late stage.

For senior citizens especially, family members should ensure notices from the tax department are never ignored, regardless of whether any actual tax is owed.

This ITAT Chandigarh case is a good one to know if you run a small business and have ever filed the wrong ITR form.

Background

Balbir Singh from Himachal Pradesh ran a mobile recharge and SIM card sales business. For AY 2017-18, he filed ITR-4 (meant for presumptive taxation) when he should have filed ITR-3 (meant for regular business income).

His commission receipts of Rs. 26,69,319 were reflected in Form 26AS.

He had already disclosed his business income and paid tax on it. But because of the wrong form, his net profit and these gross receipts appeared mismatched to the system.

What the tax department said

The CPC processed his return under Section 143(1) and noticed the Rs. 26,69,319 in Form 26AS was not matching the return filed.

• The entire commission amount was treated as additional undisclosed income
• A demand was raised on this amount
• His rectification request under Section 154 was rejected
• CIT(A) also upheld the addition, saying he should have filed the correct form or revised his return

What the taxpayer argued

• The ITR-4 was filed by mistake. ITR-3 was the correct form.
• The income from these commissions was already included in the business income declared in the return
• Taxing the Form 26AS amount again would mean the same income is taxed twice
• A corrected return was also placed on record showing the correct particulars

What the tribunal decided

ITAT Chandigarh allowed the appeal and deleted the entire addition of Rs. 26,69,319.

The key reasoning:

• A wrong form selection is a procedural error, not a substantive one
• The CIT(A) never examined whether the receipts were already included in declared income. He only focused on the form mistake.
• If income is already disclosed and taxed, it cannot be taxed again just because the wrong ITR form was filed
• The Revenue cannot benefit from a taxpayer's inadvertent procedural mistake to levy tax twice on the same income

The Tribunal also addressed the Goetze ruling, which says new deduction claims cannot be made without a revised return. It clarified that this case was different. Balbir was not claiming a new deduction. He was only contesting double taxation of already declared income.

Key takeaway

Filing the wrong ITR form is a procedural mistake. It does not make already disclosed income undisclosed.

If your income is genuinely declared and taxed, a Form 26AS mismatch alone is not enough to tax it again.

When contesting such additions, always place a corrected return and clear documentation on record to show the income was already covered in your original filing.

This case is a warning for every NRI planning to return and settle in India.

Most people assume that once they land back home, they are "resident" in India. FEMA does not work that way, and Pradeep Mishra found out the hard way.

Background

Pradeep worked in Saudi Arabia from 2000. He also had a 50-50 partnership business in Riyadh dealing in recycled oil. In May 2012, he returned to India permanently to settle with his family.

Three months after his return, in August 2012, his wife purchased agricultural land for around 30 lakh. Stamp duty took the total to 32.04 lakh. The payment came from Pradeep's NRE savings account, which he had opened in February 2010 while still in Saudi Arabia.

What the ED said

The Enforcement Directorate issued a show cause notice in November 2015, nearly three years after the purchase.

The charge was that Pradeep, being an NRI at the time of purchase, had violated Section 6(3)(i) of FEMA read with Regulation 3(a). Under FEMA, NRIs are not allowed to purchase agricultural land in India. In March 2016, a penalty of 8 lakh was imposed.

What Pradeep argued

Pradeep raised three main points before the Appellate Tribunal:

First, he had returned to India permanently in May 2012, so he was a resident when the land was purchased in August 2012.

Second, he had no intention to violate FEMA. The purchase was from lawful earnings and he was genuinely unaware of the restriction.

Third, Section 6(3)(i) of FEMA had since been omitted by the Finance Act 2015, which should work in his favor.

What the Tribunal decided

On the residency question, the Tribunal applied FEMA's own definition. Under FEMA, your residential status for a purchase in a given financial year is determined by your physical stay in the preceding financial year.

Pradeep bought the land in FY 2012-13. So his FEMA status had to be determined based on his stay in FY 2011-12. In that year, he had spent fewer than 182 days in India. By FEMA's definition, he was still an NRI when the purchase happened, even though he had physically returned.

On the "no intention" argument, the Tribunal was clear. FEMA is a civil law, not a criminal one. Words like willful or deliberate do not appear in Section 13 of FEMA. Once a contravention is established, the penalty follows. Good faith is not a defense.

On the omission of Section 6(3), the Tribunal noted that the omission came into effect only from October 2019. The show cause notice was issued in November 2015 when the section was very much alive. The Tribunal relied on the Supreme Court's ruling in Fibre Boards to hold that old FEMA violations continue to attract penalty even after the relevant provision is removed.

The contravention was upheld. However, the penalty was reduced from 8 lakh to 2 lakh, recognizing that the purchase came from lawful earnings and that Pradeep was genuinely unaware of the restriction.

The amount was to be adjusted against the 25 percent pre-deposit already made.

Key takeaway

Returning to India does not make you a FEMA resident from day one.

Your FEMA residential status for any given financial year depends on how many days you were physically present in India in the previous financial year. If you spent fewer than 182 days in India in the preceding year, you are still treated as an NRI under FEMA for that entire financial year, regardless of when you actually came back.

NRIs are prohibited from buying agricultural land in India. If you buy it even one day after landing, but within a financial year where your preceding year stay was below 182 days, you are in violation.

Ignorance and good intention are not defenses under FEMA. The penalty is automatic once contravention is proved.

Always verify your FEMA residential status with a professional before making any property purchase after returning to India.

Case: Pradeep Mishra vs Special Director, ED | Appeal No: FPA-FE-15/LKW/2017 | Appellate Tribunal Under SAFEMA, Delhi

This is a recent ITAT Bangalore ruling from August 2026 that is directly relevant for anyone who has ever had a form filed incorrectly during ITR season.

Background

Adit Nilesh Shah, a lawyer from Bengaluru, filed his return for AY 2025-26 declaring income of Rs. 32.55 lakh under the New Tax Regime.

Before filing his return, his consultant had filed Form 10-IEA on 30 September 2025, which is the form used to opt out of the New Tax Regime.

The consultant filed it inadvertently during routine compliance work. It was not the assessee's intention.

The return was filed on 24 October 2025, clearly computing tax under the New Tax Regime. No old-regime deductions were claimed.

What the Tax Department said

The CPC processed the return based on Form 10-IEA, not the return itself.

Since the Form indicated opting out of the New Tax Regime, the return was processed under the Old Tax Regime.

A demand of Rs. 1,23,770 was raised.

The CIT(A) upheld this view. He noted that Form 10-IEA was digitally verified and signed, and therefore could not be treated as non-existent just because the assessee later claimed it was a mistake.

What the taxpayer argued

The return of income is the primary statutory document reflecting the assessee's actual choice.

Form 10-IEA was filed inadvertently by the consultant and did not represent the assessee's real intention.

The return filed subsequently made the actual choice clear. No old-regime deductions were claimed at any point.

The assessee relied on an earlier Pune ITAT ruling (Akshay Nitin Malu vs ITO) where the Tribunal had held that the option reflected in the subsequently filed return should prevail over an earlier form.

What the court decided

ITAT Bangalore agreed with the assessee.

The return of income is the document through which a taxpayer declares income and computes tax. When a return clearly reflects the intended regime, it cannot be ignored simply because an inconsistent form was filed earlier.

The Tribunal noted that the assessee had not claimed any deductions exclusive to the Old Tax Regime. There was no question of double benefit.

Digital verification of a form establishes its filing and authentication. But it does not override the explanation of an inadvertent error when the subsequent return clearly reflects a different choice.

The Pune ITAT ruling in Akshay Nitin Malu was applied here. In that case the direction was opposite (New to Old), but the principle was the same: the return filed later prevails.

The demand of Rs. 1,23,770 was deleted. The AO was directed to process the return under the New Tax Regime.

Key takeaway

If a form was filed incorrectly before your ITR, and your actual return clearly reflects the correct regime with no contradictory deductions claimed, the return can prevail over the earlier form.

Digital signing of a form does not automatically make it final if the subsequent return tells a different story and the mistake is explained properly.

The regime chosen in the return matters more than a form filed in error, at least as per this line of ITAT decisions.

If you are in a similar situation, document the error clearly, ensure your return reflects the correct regime, and do not claim any deductions that belong to the other regime.

This is a straightforward but important ITAT Delhi ruling that every legal heir of a deceased taxpayer should know about.

Background

Vijay Kumar Gupta sold a house property at C-169, Greater Kailash, New Delhi in Assessment Year 2009-10.

Sale consideration declared: Rs. 2.75 crore
Return was filed on 22.07.2009 and accepted by the department under Section 143(1).

Vijay Kumar Gupta passed away on 02.10.2015.

Then, on 31.03.2016, the Income Tax Department issued a notice under Section 148 to reopen the assessment. The notice was issued in the name of the deceased person.

The son, who was the legal heir, wrote to the department asking them to drop the proceedings since the notice was issued to a dead person. The department ignored this and directed him to file a return anyway.

What the Tax Department said

A search action at the premises of a deed writer named Naresh Gupta in 2013 revealed a hard disk containing draft property agreements with cash components.

Two draft agreements for the Greater Kailash property were found, one showing a consideration of Rs. 9.90 crore instead of the Rs. 2.75 crore declared.

The Assessing Officer treated Rs. 9.90 crore as the actual sale consideration and computed LTCG at Rs. 8.71 crore as unexplained income.

What the taxpayer argued

The legal heir raised a fundamental objection before the CIT(A).

The notice under Section 148 was issued on 31.03.2016 to Vijay Kumar Gupta who had already died on 02.10.2015.

A notice issued to a dead person is not a valid notice in law.

The legal heir was under no obligation to inform the department about his father's death on his own.

If the department wanted to reopen the case, it had to issue the notice to the legal heir before the limitation period expired. It failed to do so.

Participation in the proceedings by the son could not act as estoppel against the law.

What the court decided

ITAT Delhi dismissed the Revenue's appeal and upheld the CIT(A) order in favor of the assessee.

The Tribunal held that a notice issued to a dead person is not a valid notice.

To proceed against a deceased person, the department must identify the legal heirs and serve notice on them in their capacity as deemed assessees, within the prescribed limitation period.

The limitation for issuing notice under Section 148 expired on 31.03.2016. On that very date, the original assessee was already dead.

The department could have issued notice to the legal heir before that date. It chose not to.

There is no legal obligation on a legal heir to inform the department about the death of the taxpayer on their own.

Since no valid notice was served either on the original assessee while alive or on the legal heir, the entire assessment proceedings were declared void ab initio.

The addition of Rs. 8.71 crore was deleted.

Key takeaway

A notice under Section 148 issued to a dead person is a substantive illegality, not a minor procedural error. It cannot be cured.

The department must serve notice on the legal heir within the limitation period. If the deadline passes without a valid notice to the right person, the entire reopening falls.

Legal heirs are not obligated to proactively inform the tax department about the death of a taxpayer. The burden of identifying the right person lies with the department.

If you are a legal heir dealing with an old notice issued in a deceased person's name, this ruling is directly relevant to you.

This is a straightforward but important ruling that many property sellers miss when calculating their Section 54 exemption.

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Background

Ramesh sold a property for ₹2 crore and used the proceeds to buy a new house for ₹1.5 crore.

After the purchase, the house was in a bare condition. No proper flooring, no working bathroom, no plumbing, no tiles. Essentially uninhabitable.

He spent ₹30 lakh on civil work to make it livable: flooring, tiles, bathroom fittings, plumbing, and related work.

When filing his return, Ramesh claimed Section 54 exemption on the total of ₹1.8 crore, treating the renovation expenses as part of the cost of the new house.

Note: Ramesh is an illustrative name based on real ITAT rulings. The numbers are simplified for clarity.

What the Tax Department said

The Assessing Officer capped the exemption at ₹1.5 crore.

Reasoning:

• The ₹30 lakh was spent after the house was already purchased
• Post-purchase expenditure is treated as "cost of improvement," not "cost of the new house"
• Section 54 exemption applies only to the cost of acquiring the new property
• The ₹30 lakh was added back to Ramesh's taxable capital gain

What the taxpayer argued

Ramesh's position at ITAT was practical and clear.

• The house had no usable flooring, tiles, bathroom, or plumbing at the time of purchase
• Without civil work, it could not function as a residence at all
• These expenses were not upgrades or improvements to an already functional house
• They were necessary to make the house habitable in the first place
• Therefore the ₹30 lakh should be treated as part of the cost of the new house, not as cost of improvement

What the Tribunal decided

ITAT ruled in favor of the taxpayer and deleted the disallowance.

Key findings:

• Flooring, tiles, bathroom work, plumbing, and basic civil work done to make a house usable are part of the cost of the new house
• These are not "cost of improvement" when the house was not livable without them
• Section 54 exemption is not limited to the bare purchase price
• Exemption allowed on the full ₹1.8 crore

The Tribunal relied on earlier rulings in Rustom Homi Vakil vs ACIT (ITAT Mumbai, AY 2009-10), Saleem Fazalbhoy (ITAT), B.B. Sarkar (Calcutta HC), and the recent Rajesh Saluja case which followed the same principle.

Key takeaway

If you buy a house using capital gains and spend money to make it actually liveable, that expenditure can be included in the cost of the new house for Section 54 or Section 54F.

What can typically be included:

• Purchase price
• Registration and stamp duty
• Brokerage and legal charges
• Architect fees
• Flooring, tiles, plumbing, electrical work, bathroom and kitchen civil work

The distinction matters: essential civil work that makes a house functional is not the same as luxury renovation of an already functional house.

Keep all bills, receipts, and contractor invoices. The documentation is what separates a successful exemption claim from a disallowance.

This is a recent ITAT Mumbai ruling from July 2026 that every Indian family with joint household savings should read.

Background

A search and seizure operation was carried out in September 2021 at the home and business premises of Pawan Chandak, a professional filing under the presumptive taxation scheme (Section 44ADA).

During the search, cash totaling Rs. 19,14,500 was found. Of this, Rs. 16,64,500 was seized by the Income Tax Department.

Pawan explained that the cash belonged to six different family members:

• Self: Rs. 1,78,200 (from opening cash balance in books)
• Wife: Rs. 43,500 (similarly explained)
• Father: Rs. 8,05,400 (from opening balance, agricultural income, and bank withdrawals)
• Mother (senior citizen): Rs. 4,80,600 (lifetime savings)
• Minor daughter: Rs. 2,25,300 (gifts received on occasions like Diwali, birthdays)
• Minor son: Rs. 1,81,500 (similar gifts from relatives)

Each explanation came with a cash book. The total matched the cash found during the search exactly.

What the Tax Department said

The Assessing Officer rejected the entire explanation and added Rs. 16,64,500 as unexplained money under Section 69A.

The reasoning:

• Since Pawan filed under Section 44ADA, he did not maintain regular books. The cash books were seen as an afterthought created after the search.
• The mother had no independent income and did not file returns, so her lifetime savings claim was not accepted.
• The minor children could not prove who gifted the money, on what occasions, or why it was kept at home in cash.
• Without documentary proof for the agricultural income of the father, the entire family explanation was rejected.

Penalty proceedings were also initiated separately.

What the taxpayer argued

At the appeal stage before CIT(A), the explanations for Pawan, his wife, and his father were accepted. An addition of Rs. 7,77,100 was deleted.

But Rs. 8,87,400 relating to the mother and the two minor children was still sustained.

When the case reached ITAT, the assessee's counsel made two key arguments:

First, the cultural reality argument. Demanding that a senior citizen mother maintain commercial books of account to justify Rs. 4,80,600 saved over a lifetime is unreasonable. Indian households routinely accumulate cash savings through household allowances, stridhan, and family gifts. Minor children receiving small cash gifts on Diwali, birthdays, or weddings is completely customary. Mathematical precision cannot be expected in such cases.

Second, the telescoping argument. In AY 2019-20, the CIT(A) had already accepted that Rs. 20,60,970 in cash came from the sale of agricultural land (which was not a capital asset) and deleted the addition. That accepted cash pool was large enough to cover the entire Rs. 19,14,500 found during the search.

What the court decided

ITAT Mumbai ruled in favor of the assessee and deleted the remaining addition of Rs. 8,87,400.

The Tribunal made two important observations:

On the cultural point, it held that tax authorities cannot function detached from Indian socio-cultural realities. The Supreme Court itself has said that human probabilities and surrounding circumstances matter when evaluating transactions. A senior citizen mother not filing returns is a compliance reality, not an incriminating fact. The same logic applies to minor children receiving gifts on customary occasions.

On telescoping, the Tribunal held that once a cash pool has been recognized by the department in a prior year and the Revenue has not shown it was spent or invested elsewhere, that cash remains available to explain a subsequent search. The department cannot accept cash on one hand and deny its existence later.

The full addition was deleted. Appeal allowed.

Key takeaway

Income Tax search cases often go wrong because families cannot produce documents for perfectly normal things, like a mother's lifetime savings or a child's Diwali gifts. This ruling is a reminder that:

• Non-filing of returns by a senior citizen or minor is not proof of unexplained income.
• Cash gifts to children on customary occasions are a recognized part of Indian social practice.
• If a cash pool was accepted by the department in an earlier year, it can be used to explain cash found in a later search. This is the telescoping principle.
• The explanation needs to be consistent and submitted with whatever supporting material is available.

This is a recent ITAT Chennai ruling (August 2026) that carries an important lesson for professionals, especially doctors, on what happens when you go completely silent during an assessment — and whether that silence costs you all your legitimate deductions.

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Background

Selvakumar Arumugam, a doctor based in Coimbatore, did not file his income tax return for AY 2018-19.

The tax department received information that he had earned substantial professional fees and also made some share transactions during the year.

Since no return was filed and no response came from the doctor even after notices, the Assessing Officer completed the assessment ex-parte under Section 147 read with Section 144.

Professional fees received (as per Form 26AS): Rs. 35,01,500

Total income assessed by AO: Rs. 38,48,710

What the Tax Department said

Since the assessee never filed a return or responded to any notice, the AO treated the entire gross professional receipts of Rs. 35,01,500 as taxable income.

On the share transactions, both the purchase value (Rs. 1,14,446) and the sale value (Rs. 1,23,975) were added as income separately.

The cost of acquiring the shares was treated as unexplained investment under Section 69A.

The CIT(A) upheld all these additions when the doctor finally appealed, reasoning that the benefit of Section 44ADA (presumptive taxation at 50% of receipts) is available only if the assessee has filed a return of income declaring income on that basis.

What the taxpayer argued

Before the Tribunal, the doctor's advocate made three key arguments.

First, Section 44ADA does not require a return to have been filed as a precondition for claiming the 50% deduction. The section itself does not say this.

Second, the assessee had no books of accounts and had offered 50% of professional receipts as income before the CIT(A), with the corresponding tax already paid on that amount.

Third, in subsequent assessment years, the doctor had filed returns under Section 44ADA declaring 50% of professional receipts as income. The revenue accepted those returns under Section 143(1) without any adjustment.

The argument was that consistency and the nature of the profession had not changed. Taxing 100% of gross receipts for one year while accepting 50% in all other years is unreasonable.

What the Tribunal decided

The ITAT Chennai bench noted that the core question was not whether the doctor could formally invoke Section 44ADA without filing a return.

The real question was simpler: can the entire gross professional receipt of Rs. 35,01,500 be treated as net income just because no return was filed?

The Tribunal said no.

It held that non-filing of a return does not automatically convert gross receipts into net taxable income.

It directed the Assessing Officer to adopt Rs. 17,50,750 (50% of gross receipts) as the professional income for the year.

The bench noted that acceptance of 50% in subsequent years, while not legally binding, was a relevant and reasonable basis to apply the same logic here.

On the share transactions and other additions, the assessee did not press those grounds during the hearing. Those were dismissed accordingly.

Key takeaway

Not filing a return is a serious mistake. But it does not give the department a free pass to tax gross receipts as if there were zero expenses or deductions involved.

For professionals covered under Section 44ADA (doctors, lawyers, architects, engineers, etc.), the 50% presumptive benefit exists in law. A tribunal can recognize the reasonableness of that position even in an ex-parte assessment.

That said, the doctor here lost all arguments on the share additions simply because his lawyer did not press those grounds. Silence during proceedings, whether at the AO stage or at the Tribunal, has real consequences.

If you are a professional who has missed filings and received a notice, engaging early and properly is always cheaper than the alternative.

This is a recent ITAT Mumbai ruling from July 2026 that addresses a question many taxpayers in similar situations face: can you claim Section 54F exemption if you buy a house from your own spouse?

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Background

Neha Karan Motwani, a Mumbai-based individual, filed her return for AY 2021-22 declaring total income of around ₹1.92 crore.

During that year, she sold unlisted shares of M/s Fitternity Health E-Solutions Private Limited and reported long-term capital gains of ₹8.31 crore.

To claim Section 54F exemption, she reinvested ₹7.50 crore in a residential flat at Juhu Tara Road, Santacruz (West), Mumbai.

The flat was purchased from her husband, Karan Haresh Motwani, who was the registered owner of that property.

All formalities were completed: registered deed, stamp duty paid, full consideration transferred through banking channels.

She claimed Section 54F exemption of ₹6.91 crore on this investment.

What the Tax Department said

The Assessing Officer denied the entire exemption of ₹6.91 crore.

The AO's reasoning:

• Neha purchased the flat from her husband
• Her husband reported a short-term capital gain of ₹4.85 crore from that same sale
• He then set off that gain against his business losses of ₹3.56 crore
• The AO concluded that the entire transaction was a pre-planned arrangement to avoid tax
• Exemption was denied citing the Supreme Court's McDowell ruling on colorable devices

The CIT(A) agreed with the AO and confirmed the disallowance.

What the taxpayer argued

The taxpayer's counsel, Shri Rahul Hakani, made a straightforward but important point.

The property was sold to Neha in June 2021. Her husband's business losses only arose on 31 March 2022, nine months later.

On the date the transaction happened, those losses had not accrued. They could not have been anticipated or planned for.

So the AO's entire basis for calling this a tax evasion arrangement was factually wrong.

Additional arguments made:

• The transaction was fully registered and documented
• Stamp duty was paid at full market value
• Consideration was paid from Neha's own bank account
• There is no legal bar under the Income Tax Act on purchasing property from a spouse
• The husband set off only a partial amount of the gain, not the full amount, against business losses
• Legitimate tax planning within the law cannot be treated as tax evasion

Reliance was placed on earlier Mumbai ITAT rulings in Kavita Manoj Damani v ITO (2025) and Nidhi Siddharth Kejriwal v DCIT (April 2026), where exemption under Section 54/54F was allowed on property purchased from a husband.

What the Tribunal decided

ITAT Mumbai allowed the appeal in full.

The Tribunal found no merit in the AO's reasoning and made the following observations:

• The property was sold to Neha in June 2021; the husband's business losses arose only on 31.03.2022
• The AO's conclusion that the transaction was designed to enable set-off of losses was factually unsustainable
• The husband set off only part of the gain, not the full amount, which further weakened the evasion argument
• Transactions between spouses, when carried out within the legal framework, cannot be treated as a colorable device

The Tribunal also relied on the Supreme Court's ruling in Vodafone International Holdings, which held that genuine tax planning within the law cannot be treated as evasion.

Direction to AO: Delete the entire disallowance of ₹6.91 crore claimed under Section 54F.

Final outcome

• Appeal allowed in favor of the assessee
• Disallowance of ₹6.91 crore under Section 54F deleted
• Case: ITA 4342/MUM/2026, order dated 17 July 2026

Key takeaway

Buying a house from your spouse does not automatically disqualify you from Section 54F exemption.

What matters is whether the transaction is genuine: registered, stamped at market value, consideration paid through banking channels, and within the legal framework.

The AO cannot assume tax evasion based on how the other party used the proceeds, especially if those events happened months after the transaction.

Timing matters. If the alleged tax benefit in the other party's hands arose after the transaction date, the evasion charge simply does not hold.

An unusual case from ITAT Chandigarh where the tribunal conditionally remanded a case back to the Assessing Officer with an interesting environmental twist.

Background

Ranbir Singh, a resident of Yamuna Nagar, filed his return for AY 2017-18 declaring a total income of just Rs. 1,79,160 along with Rs. 3 lakh in agricultural income.

The case was picked up for scrutiny. Things got complicated quickly.

What the Tax Department found

During the assessment, the Assessing Officer flagged several issues:

• Cash deposits of Rs. 85.93 lakh in bank accounts during the demonetization period with no satisfactory explanation of source
• Unsecured loans of Rs. 9.25 crore where the assessee could not establish the identity, creditworthiness, or genuineness of the lenders
• Sundry creditors of Rs. 1.07 crore with no supporting confirmations
• Agricultural income of Rs. 3 lakh that was not backed by any documentary evidence

Since the assessee did not furnish the required details during assessment proceedings, the Assessing Officer treated all of these as unexplained income.

Total additions: Rs. 11.22 crore
Assessed income: Rs. 11.23 crore

What happened at CIT(A)

The assessee appealed, but the first appellate authority was not convinced. All additions — cash deposits, unsecured loans, sundry creditors, and agricultural income — were confirmed.

What the taxpayer argued before ITAT

The assessee's counsel did not contest the merits at this stage. Instead, he made a straightforward request:

• Grant one final opportunity to place the relevant documents and evidence before the Assessing Officer
• The matter involves large sums that require proper document verification, which was not done earlier
• As a gesture of goodwill and social responsibility, the assessee offered to plant 500 trees at the Yamuna Bank site in Panipat through an NGO called Hari Yamuna Sehyog Samiti within one month

The assessee also committed to paying Rs. 30 per plant per year as maintenance cost for one year.

What the Tribunal decided

ITAT Chandigarh accepted the request but made the relief strictly conditional:

• The assessee must plant 500 trees at the specified Yamuna Bank site within one month of the order, or deposit the full cost with the NGO within the same period
• Proof of compliance must be submitted to the Assessing Officer
• If the condition is not met, the CIT(A) order stands restored and the appeal is dismissed automatically
• Subject to compliance, the matter is remanded back to the Assessing Officer for fresh adjudication

Order pronounced: 14 August 2026

Key takeaway

This case is a reminder of a few things:

Non-cooperation during assessment proceedings almost always results in worst-case additions. The assessee here had three separate problem areas, demonetisation cash, unverified loans, and unsubstantiated agricultural income, all of which could have been addressed with proper documentation at the right time.

When a taxpayer misses that window, getting back into court costs time, legal fees, and in this case, a few hundred trees.

The tribunal's conditional remand also signals that second chances in tax litigation are not automatic. They come with terms.

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This is a straightforward but important ruling from ITAT Delhi that every small business owner and kirana trader should know about.

Background

Ashok Kumar from Hisar, Haryana ran a small retail business selling fruits and vegetables.

The tax department received information that he had made substantial bank transactions but had not filed an ITR for AY 2017-18. A notice was issued under Section 148 to reopen the case.

In response, Ashok filed a belated return declaring total income of Rs. 2,13,177 on a turnover of Rs. 90,12,856. That works out to a profit margin of about 2.36%.

He also submitted his cash book, bank account statements, and income computation to support his declared income.

What the Tax Department said

The Assessing Officer rejected his declared income and applied presumptive taxation under Section 44AD.

Under Section 44AD, if a small business does not maintain audited books, the law presumes income at 8% of turnover (or 6% for digital receipts).

Since Ashok had not got his books audited under Section 44AB, the AO calculated income at 8% of his turnover:

• 8% of Rs. 90,12,856 = Rs. 7,21,028
• Declared income = Rs. 2,13,177
• Addition made = Rs. 5,07,851

The first appeal before CIT(A)/NFAC also upheld this addition.

What the taxpayer argued

Two key points were raised on behalf of the assessee:

First, Ashok never opted for presumptive taxation under Section 44AD. The scheme does not apply automatically just because someone is a small trader.

Second, the Assessing Officer accepted the turnover as declared and never rejected or disturbed the books of account. If the books were accepted, the profit shown in those books should also be accepted.

Additionally, since Ashok's total income did not exceed the basic exemption limit, the mandatory audit requirement under Section 44AB did not apply to him at all.

What the court decided

ITAT Delhi agreed with the assessee on both counts.

The Tribunal noted that the books of account were neither rejected nor disturbed by the department at any stage. The turnover itself was accepted.

It also confirmed that since the assessee never opted for Section 44AD, the department could not unilaterally apply presumptive taxation to override his actual books.

The entire addition of Rs. 5,07,851 was deleted.

Appeal allowed.

Key takeaway

Section 44AD is optional, not automatic. If a small business owner maintains books and does not opt into presumptive taxation, the department cannot forcibly apply the 8% rate.

If the Assessing Officer accepts your books and turnover without rejection, the declared income from those books must be accepted too.

For traders whose income falls below the taxable limit, Section 44AB audit requirements do not kick in either.

India has a new one-time disclosure scheme for foreign assets and income. It opened on 16th August 2026 and closes on 31st December 2026. If you have foreign assets that were never declared, this window matters.

Background

The scheme is called FAST-DS — Foreign Assets of Small Taxpayers Disclosure Scheme, 2026. It comes under Chapter IV of the Finance Act, 2026.

The idea is straightforward: if you have foreign bank accounts, property, shares, or other assets outside India that were never reported to the tax department, you can now come clean voluntarily, pay a fixed charge, and get immunity from prosecution under the Black Money Act, 2015.

The valuation date for all assets is 31st March 2026.

Who can declare

The scheme is open to:

• Indian residents who have undisclosed foreign assets or income
• Non-residents or RNORs, if they were resident in India either in the year the income was earned or in the year the asset was acquired

So even if you have moved abroad, you may still be eligible depending on when the asset was acquired.

What can be declared

There are two buckets.

Bucket 1: Undisclosed foreign assets or income that was never offered to tax

• Total value must not exceed ₹1 crore as on 31st March 2026
• You pay 30% tax on the value, plus an equal additional amount — effectively 60% of the declared value
• Example: ₹60 lakh in a foreign bank account plus ₹20 lakh in undisclosed income means ₹48 lakh payable

Bucket 2: Foreign assets that were already taxed but never reported in the foreign assets schedule of your ITR

• Total value must not exceed ₹5 crore
• You pay a flat fee of ₹1 lakh

How your foreign assets are valued

All values are reported in Indian Rupees, converted at RBI reference rates as on 31st March 2026.

The general rule is that fair market value (FMV) is the higher of the cost of acquisition or the open market price on the valuation date, supported by a valuer's report. If no valuation report is obtained, indexed cost of acquisition is used as FMV.

Here is how specific asset types are treated:

Foreign bank accounts: Value is the sum of all deposits made from the date the account was opened up to 31st March 2026. Withdrawals that were later re-deposited into the same account are excluded to avoid double counting. If the account was partly declared under the earlier Black Money Act window in 2015, only deposits made after that declaration are counted.

Immovable property: Higher of cost of acquisition or open market value as per a valuation report from a valuer recognized by the government of the country where the property is located.

Quoted shares and securities: Higher of cost of acquisition or the average of the lowest and highest price on the valuation date on an established securities market. If there was no trading on that date, the nearest preceding trading date is used.

Unquoted equity shares: Higher of cost of acquisition or a formula-based value derived from the company's book value and net assets.

Jewelry, bullion, artwork: Higher of cost of acquisition or open market price on the valuation date, supported by a recognized valuer's report.

Foreign partnership or LLP interest: Valued based on the net assets of the entity, allocated among partners in proportion to capital contribution and profit-sharing ratio.

One important rule on double counting: if sale proceeds from one asset were used to acquire another, the value of the original asset is reduced by the amount reinvested. This prevents the same money being counted twice.

Valuation tolerance: For assets other than bank accounts, a difference of up to 20% between your declared value and the value later determined by the tax authority will not by itself invalidate your declaration.

How the process works

• File Form 1 electronically before 31st December 2026. You can declare multiple assets in a single form. Attach documents evidencing acquisition and valuation reports where applicable.
• The tax authority issues a payment order in Form 2 within one month
• Pay within two months of receiving Form 2
• Report payment via Form 3, and receive final confirmation in Form 4

If you cannot pay in time, a further two-month extension is available with 1% simple interest per month on the amount due. Beyond that outer limit, the scheme benefit lapses entirely for that declaration.

What immunity do you get

Once you declare and pay:

• No further tax or penalty under the Black Money Act, 2015
• No prosecution for the declared assets or income
• The declared amount is not added back to your total income under the Income Tax Act or the Black Money Act

If assessment proceedings for the same asset or income are already pending, the Assessing Officer must take your declaration into account while finalizing the order.

One important restriction: once you declare, you cannot claim rectification, revision, or any relief in respect of any assessment already completed for the same income or asset.

Where the scheme does not apply

• Assets that are proceeds of crime under the Prevention of Money-laundering Act, 2002
• Assets for which assessment has already been completed under the Black Money Act, 2015

Key takeaway

The 60% charge on Bucket 1 assets is steep. But it comes with a clean slate and immunity from prosecution. For anyone sitting on unresolved foreign asset exposure under ₹1 crore, this is likely the lowest-risk path to regularization before enforcement catches up.

The window is open until 31st December 2026 and the entire process is online.

FAQs document can be accessed from here: https://www.incometaxindia.gov.in/documents/81799/15520974/FAST-DS-FAQs.pdf

India has a new one-time disclosure scheme for foreign assets and income. It opened on 16th August 2026 and closes on 31st December 2026. If you have foreign assets that were never declared, this window matters.

Background

The scheme is called FAST-DS — Foreign Assets of Small Taxpayers Disclosure Scheme, 2026. It comes under Chapter IV of the Finance Act, 2026.

The idea is straightforward: if you have foreign bank accounts, property, shares, or other assets outside India that were never reported to the tax department, you can now come clean voluntarily, pay a fixed charge, and get immunity from prosecution under the Black Money Act, 2015.

The valuation date for all assets is 31st March 2026.

Who can declare

The scheme is open to:

• Indian residents who have undisclosed foreign assets or income
• Non-residents or RNORs, if they were resident in India either in the year the income was earned or in the year the asset was acquired

So even if you have moved abroad, you may still be eligible depending on when the asset was acquired.

What can be declared

There are two buckets.

Bucket 1: Undisclosed foreign assets or income that was never offered to tax

• Total value must not exceed ₹1 crore as on 31st March 2026
• You pay 30% tax on the value, plus an equal additional amount — effectively 60% of the declared value
• Example: ₹60 lakh in a foreign bank account plus ₹20 lakh in undisclosed income means ₹48 lakh payable

Bucket 2: Foreign assets that were already taxed but never reported in the foreign assets schedule of your ITR

• Total value must not exceed ₹5 crore
• You pay a flat fee of ₹1 lakh

How your foreign assets are valued

All values are reported in Indian Rupees, converted at RBI reference rates as on 31st March 2026.

The general rule is that fair market value (FMV) is the higher of the cost of acquisition or the open market price on the valuation date, supported by a valuer's report. If no valuation report is obtained, indexed cost of acquisition is used as FMV.

Here is how specific asset types are treated:

Foreign bank accounts: Value is the sum of all deposits made from the date the account was opened up to 31st March 2026. Withdrawals that were later re-deposited into the same account are excluded to avoid double counting. If the account was partly declared under the earlier Black Money Act window in 2015, only deposits made after that declaration are counted.

Immovable property: Higher of cost of acquisition or open market value as per a valuation report from a valuer recognized by the government of the country where the property is located.

Quoted shares and securities: Higher of cost of acquisition or the average of the lowest and highest price on the valuation date on an established securities market. If there was no trading on that date, the nearest preceding trading date is used.

Unquoted equity shares: Higher of cost of acquisition or a formula-based value derived from the company's book value and net assets.

Jewelry, bullion, artwork: Higher of cost of acquisition or open market price on the valuation date, supported by a recognized valuer's report.

Foreign partnership or LLP interest: Valued based on the net assets of the entity, allocated among partners in proportion to capital contribution and profit-sharing ratio.

One important rule on double counting: if sale proceeds from one asset were used to acquire another, the value of the original asset is reduced by the amount reinvested. This prevents the same money being counted twice.

Valuation tolerance: For assets other than bank accounts, a difference of up to 20% between your declared value and the value later determined by the tax authority will not by itself invalidate your declaration.

How the process works

• File Form 1 electronically before 31st December 2026. You can declare multiple assets in a single form. Attach documents evidencing acquisition and valuation reports where applicable.
• The tax authority issues a payment order in Form 2 within one month
• Pay within two months of receiving Form 2
• Report payment via Form 3, and receive final confirmation in Form 4

If you cannot pay in time, a further two-month extension is available with 1% simple interest per month on the amount due. Beyond that outer limit, the scheme benefit lapses entirely for that declaration.

What immunity do you get

Once you declare and pay:

• No further tax or penalty under the Black Money Act, 2015
• No prosecution for the declared assets or income
• The declared amount is not added back to your total income under the Income Tax Act or the Black Money Act

If assessment proceedings for the same asset or income are already pending, the Assessing Officer must take your declaration into account while finalizing the order.

One important restriction: once you declare, you cannot claim rectification, revision, or any relief in respect of any assessment already completed for the same income or asset.

Where the scheme does not apply

• Assets that are proceeds of crime under the Prevention of Money-laundering Act, 2002
• Assets for which assessment has already been completed under the Black Money Act, 2015

Key takeaway

The 60% charge on Bucket 1 assets is steep. But it comes with a clean slate and immunity from prosecution. For anyone sitting on unresolved foreign asset exposure under ₹1 crore, this is likely the lowest-risk path to regularization before enforcement catches up.

The window is open until 31st December 2026 and the entire process is online.

FAQs document can be accessed from here: https://www.incometaxindia.gov.in/documents/81799/15520974/FAST-DS-FAQs.pdf