Issues: (i) Whether tax was deductible at source on external development charges of Rs. 18,00,000 paid to the urban development authority; (ii) Whether tax was deductible at source on payments of Rs. 1,15,28,550 characterised as administrative charges connected with change in beneficial interest and development rights.

Issue (i): Whether tax was deductible at source on external development charges of Rs. 18,00,000 paid to the urban development authority.

Analysis: The payment was admittedly external development charges. The jurisdictional precedent governing such payments required deduction of tax at source under Section 194C. The pendency of a challenge to that precedent before the Supreme Court did not displace its binding force, though implementation was directed to abide by the Supreme Court's eventual outcome.

Conclusion: Tax was deductible at source under Section 194C on the external development charges of Rs. 18,00,000; the issue is against the assessee.

Issue (ii): Whether tax was deductible at source on payments of Rs. 1,15,28,550 characterised as administrative charges connected with change in beneficial interest and development rights.

Analysis: The assessee had earlier denied making these payments but, before the Tribunal, admitted them and produced material asserting that they were administrative charges rather than external development charges. The nature of the payments, the applicable government scheme, and the resulting obligations under Chapter XVII-B required factual verification and legal examination not undertaken in the appellate proceedings.

Conclusion: The deductibility of tax at source on Rs. 1,15,28,550 requires fresh determination on merits after admission and verification of the evidence.

Final Conclusion: The TDS default concerning the admitted external development charges stands determined, while the character and TDS consequences of the remaining payments require de novo adjudication.

Ratio Decidendi: A binding jurisdictional precedent on the TDS character of a payment must be applied unless displaced by a superior court, whereas a materially disputed payment character requires fact-based determination before TDS liability can be fixed.

Issues: Whether Internal TNMM, based on the assessee's AE and non-AE segments, was the appropriate method for benchmarking ITeS transactions.

Analysis: The AE and non-AE operations performed broadly similar customer-care and technical-support functions within the ITeS industry. The segmental results were prepared using allocation keys, and no specific defect or discrepancy in those allocation keys or in the segmental analysis was established. The absence of audited segments, without identifying deficiencies in the segmental data, did not justify rejection of the internal comparison. Internal segmental financial data provided a more reliable measure than external comparables for applying TNMM.

Conclusion: Internal TNMM was required to be adopted for benchmarking the ITeS transactions; the substitution of External TNMM was unsustainable.

Issues: (i) Whether reassessment initiated after four years was invalid for want of failure by the assessee to make a full and true disclosure of material facts; (ii) Whether the entire alleged bogus purchases could be added where both purchases and corresponding sales were treated as bogus.

Issue (i): Whether reassessment initiated after four years was invalid for want of failure by the assessee to make a full and true disclosure of material facts.

Analysis: The original assessment contained no examination of the substantial purchases and sales and incorrectly recorded that there was no business activity. Subsequent survey information indicating accommodation entries and bogus transactions constituted fresh material having a live nexus with possible income escaping assessment. Mere production of records did not establish a true and full disclosure of the primary facts concerning the genuineness of the transactions; reopening was therefore not based on a mere change of opinion.

Conclusion: The reassessment was valid, against the assessee.

Issue (ii): Whether the entire alleged bogus purchases could be added where both purchases and corresponding sales were treated as bogus.

Analysis: Banking-channel payments alone did not establish the genuineness of transactions when the assessee failed to substantiate physical movement of goods or the existence of counterparties. However, treating only purchases as adverse while accepting the corresponding alleged bogus sales disregarded the profit embedded in the transactions. Income was consequently required to be estimated on the business turnover, with credit for profit already disclosed.

Conclusion: The addition of the entire alleged bogus purchases was unsustainable; income shall be computed by applying a gross-profit rate of 5% to turnover after allowing credit for the disclosed profit, in favour of the assessee.

Final Conclusion: Reassessment jurisdiction stands sustained, but the taxable income is confined to profit estimated on the impugned turnover rather than the full amount of alleged bogus purchases.

Ratio Decidendi: Where alleged bogus purchases and corresponding sales form part of the same unsubstantiated transactions, income is to be assessed on a reasonable estimated profit basis rather than by adding the entire purchase amount, while fresh information exposing the untruthfulness of prior disclosures permits reassessment.

Issues: (i) Whether rejection of the application for immunity from penalty under section 270AA without an opportunity of hearing and without identifying unmet conditions was valid; (ii) Whether income returned only in response to notice under section 148 constituted under-reported income liable to penalty under section 270A.

Issue (i): Whether rejection of the application for immunity from penalty under section 270AA without an opportunity of hearing and without identifying unmet conditions was valid.

Analysis: Section 270AA(6) requires an opportunity of hearing before rejection of an immunity application. The penalty order did not disclose which conditions under section 270AA(1) were not fulfilled. The immunity application therefore required fresh examination after allowing the assessee to establish compliance with the prescribed conditions, including consideration of the delay in filing Form No. 68.

Conclusion: The rejection of immunity could not stand without fresh examination after affording an opportunity of hearing; the issue is in favour of the assessee.

Issue (ii): Whether income returned only in response to notice under section 148 constituted under-reported income liable to penalty under section 270A.

Analysis: The assessee had not furnished the original return and provided no explanation for that failure. Income disclosed only after issuance of notice under section 148 consequently fell within under-reported income, subject to the prior determination of the immunity application and a proper penalty proceeding.

Conclusion: In the absence of an explanation for non-filing of the original return, the income returned under section 148 constitutes under-reported income; this issue is against the assessee.

Final Conclusion: The Assessing Officer must first adjudicate the immunity application afresh after hearing the assessee and, if immunity is unavailable, determine penalty through a reasoned order after granting a further opportunity of hearing.

Ratio Decidendi: An application for penalty immunity cannot be rejected without affording the assessee an opportunity of hearing and identifying the statutory conditions that remain unfulfilled.

Issues: (i) Whether the revisionary order under section 263 was barred by limitation under section 263(2) of the Income-tax Act, 1961; (ii) Whether the assessment order accepting that the software-related receipts were not taxable as royalty was erroneous and prejudicial to the interests of the Revenue.

Issue (i): Whether the revisionary order under section 263 was barred by limitation under section 263(2) of the Income-tax Act, 1961.

Analysis: The assessment order under section 143(3) was passed on 6 June 2022. The two-year period prescribed from the end of that financial year expired on 31 March 2025. The revision proceedings commenced only in September 2025 and the revisionary order was passed on 9 October 2025.

Conclusion: The revisionary order was barred by limitation and was invalid, in favour of the assessee.

Issue (ii): Whether the assessment order accepting that the software-related receipts were not taxable as royalty was erroneous and prejudicial to the interests of the Revenue.

Analysis: The assessment proceedings covered the contractual arrangements, embedded software, copyright-related rights, the treaty position under Article 12, and the applicability of the Supreme Court ruling on software payments. The assessment order accepted that the receipts were not taxable as royalty. The same position had also been accepted or decided in the assessee's favour in earlier years, including after examination of the end-user licence arrangement.

Conclusion: The assessment order contained no error warranting revision under section 263 and was not erroneous or prejudicial to the interests of the Revenue, in favour of the assessee.

Final Conclusion: The revisionary order was quashed, leaving the original assessment undisturbed.

Ratio Decidendi: A revisionary order under section 263 is invalid where it is passed beyond the statutory limitation period prescribed by section 263(2).

Issues: Eligibility of a Souharda Sahakari registered under the Karnataka Souharda Sahakari Act, 1997 for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: A Souharda Sahakari providing credit facilities exclusively to its members falls within the meaning of a co-operative society for section 2(19). Its dealings with members do not destroy mutuality merely because of the character or number of associate members under its bye-laws. Profits and gains attributable to providing credit facilities to members, including income connected with that eligible activity, qualify for deduction under section 80P(2)(a)(i).

Conclusion: The assessee was entitled to deduction under section 80P(2)(a)(i) in respect of its entire eligible income from providing credit facilities to members.

Issues: (i) Whether interest on borrowed capital used for strategic investments to acquire or maintain controlling interests in group companies was deductible as expenditure incurred for the purposes of business under section 36(1)(iii). (ii) Whether allowance of similar interest expenditure in other assessment years or in group entities barred an independent examination of the claim for the relevant assessment year.

Issue (i): Whether interest on borrowed capital used for strategic investments to acquire or maintain controlling interests in group companies was deductible as expenditure incurred for the purposes of business under section 36(1)(iii).

Analysis: Deduction under section 36(1)(iii) requires interest liability on borrowed capital and borrowing for business purposes. The expression "for the purposes of business" extends beyond immediate earning of business profits and includes commercially expedient measures undertaken in the capacity of a businessperson. Financial consultancy, investment solutions, fund syndication, capital-market advisory services, and strategic investments for securing or retaining control constituted the assessee's business activities on the evidence of its objects, investment records, and regulatory disclosures. The low amount of operational receipts or the statutory classification of dividend income could not negate the business purpose of investments made to obtain controlling interests. Further, where available interest-free funds exceeded the relevant investments or advances, a presumption applied that those investments or advances were made from interest-free funds; no direct fund-wise nexus was required in those circumstances.

Conclusion: Interest on the borrowed capital was allowable under section 36(1)(iii), and deletion of the interest disallowance was in favour of the assessee.

Issue (ii): Whether allowance of similar interest expenditure in other assessment years or in group entities barred an independent examination of the claim for the relevant assessment year.

Analysis: Each assessment year is a separate unit of assessment. Earlier or subsequent acceptance of a claim, including acceptance in the case of group entities, does not prevent independent scrutiny of the claim in the relevant year. The principle of consistency did not create a general bar against such examination.

Conclusion: Earlier assessments and treatment of group entities did not bar independent examination of the interest claim, and this contention was against the assessee.

Final Conclusion: The interest expenditure remained deductible because the borrowings served the assessee's strategic investment business and the available interest-free funds supported the impugned investments and advances.

Ratio Decidendi: Interest on borrowed capital is deductible where strategic investments made to acquire or maintain controlling interests are commercially expedient business activities, particularly where sufficient interest-free funds justify a presumption that non-interest-bearing investments or advances were funded from such funds.

Issues: (i) Whether revision under Section 263 could be sustained on the basis that the assessment officer accepted the explanation for demonetisation-period cash deposits without proper inquiry; (ii) Whether the alleged non-initiation of penalty on an assessed addition rendered the assessment order erroneous and prejudicial to the interests of the Revenue.

Issue (i): Whether revision under Section 263 could be sustained on the basis that the assessment officer accepted the explanation for demonetisation-period cash deposits without proper inquiry.

Analysis: The assessment officer had raised a query regarding the cash deposits, considered the explanation that part of the amount represented the wife's and children's accumulated savings, and placed the wife's affidavit on record. The view so adopted was plausible in the assessee's factual background. No discrepancy in the affidavit, deficiency in the inquiry, or adverse material against the accepted explanation was identified to establish that the assessment was erroneous and prejudicial to the interests of the Revenue.

Conclusion: Revision on the cash-deposit issue was unsustainable, in favour of the assessee.

Issue (ii): Whether the alleged non-initiation of penalty on an assessed addition rendered the assessment order erroneous and prejudicial to the interests of the Revenue.

Analysis: The record established that penalty proceedings had in fact been initiated and were subsequently dropped after cancellation of the assessment order. The factual premise that penalty proceedings had not been initiated was therefore incorrect.

Conclusion: Revision on the penalty-proceedings issue was unsustainable, in favour of the assessee.

Final Conclusion: Neither basis invoked for revision established the statutory conditions for disturbing the original assessment.

Ratio Decidendi: Revisionary jurisdiction cannot be invoked where the assessment officer has made inquiry and adopted a plausible view, absent material establishing that the assessment is both erroneous and prejudicial to the interests of the Revenue.

Issues: Whether reassessment proceedings could validly be initiated by a show-cause notice issued under Section 148A(1) to a deceased assessee, and thereafter continued against the legal representative.

Analysis: Service of a show-cause notice upon the assessee under Section 148A(1) is a condition precedent to an order under Section 148A(3) and a reopening notice under Section 148. Issuance of notice to the correct person is foundational to jurisdiction. As the Department had already registered the legal heir before initiation, the notice addressed to the deceased assessee was invalid at inception. Section 159 permits proceedings against a legal representative but does not authorise initiation against a deceased person followed by subsequent substitution. The legal heir's reply, which raised the jurisdictional objection, could not cure the defect because participation cannot confer jurisdiction.

Conclusion: The show-cause notice issued to the deceased assessee was invalid and non-est; the consequential order under Section 148A(3), reopening notice under Section 148, and consequential reassessment proceedings were unsustainable.

Issues: (i) Whether corporate guarantees issued for associated enterprises constitute international transactions under Section 92B of the Income-tax Act, 1961; (ii) Whether the arm's length rate of corporate guarantee commission should be determined at 0.60%; (iii) Whether the claim for additional TDS/TCS credit requires verification.

Issue (i): Whether corporate guarantees issued for associated enterprises constitute international transactions under Section 92B of the Income-tax Act, 1961.

Analysis: The issue had consistently been determined in the assessee's own earlier assessment years. A corporate guarantee provided to an associated enterprise is required to be benchmarked under the arm's length principle.

Conclusion: Corporate guarantees issued for associated enterprises constitute international transactions. This issue is against the assessee.

Issue (ii): Whether the arm's length rate of corporate guarantee commission should be determined at 0.60%.

Analysis: The rate charged by the assessee's own bank under its facility letter constituted the closest internal comparable uncontrolled price. External bank guarantee rates could not automatically be adopted because bank guarantees and corporate guarantees involve materially different commercial considerations, including creditworthiness, security and risk. Consistent decisions in the assessee's own cases had accepted 0.60%, and no material factual distinction for the relevant year justified departure from that rate.

Conclusion: The arm's length rate of corporate guarantee commission shall be restricted to 0.60%, with appropriate credit for commission already recovered from associated enterprises. This issue is in favour of the assessee.

Issue (iii): Whether the claim for additional TDS/TCS credit requires verification.

Analysis: The additional TDS/TCS credit claim was not specifically adjudicated in the assessment order and depends upon verification of the relevant factual material and supporting evidence.

Conclusion: The TDS/TCS credit claim is restored for verification and grant of relief in accordance with law.

Final Conclusion: Corporate guarantee transactions remain subject to transfer-pricing benchmarking at 0.60%, while the additional TDS/TCS credit claim is to be factually verified.

Ratio Decidendi: Where a reliable internal comparable uncontrolled price is available for benchmarking a corporate guarantee, it is preferred over unadjusted external bank guarantee rates that are not comparably reflective of the transaction.

Issues: (i) Whether an Advance Pricing Agreement covering earlier years remained relevant for benchmarking in a subsequent year outside its express coverage; (ii) Whether comparables accepted in the preceding year could be excluded solely by applying a turnover filter without establishing a material impact on margins; (iii) Whether a comparable having aggregate related-party transactions exceeding the adopted threshold could remain in the final comparable set; (iv) Whether a transfer-pricing adjustment was sustainable where the assessee's margin fell within the arm's length range.

Issue (i): Whether an Advance Pricing Agreement covering earlier years remained relevant for benchmarking in a subsequent year outside its express coverage.

Analysis: The APA did not extend to the relevant assessment year and could not operate as a binding arm's length determination. However, continuity of the covered transaction, methodology and FAR profile made the APA and the framework accepted therein relevant persuasive material. Departure from that framework required identification of material differences in functions, assets, risks, transaction characteristics or economic circumstances.

Conclusion: The APA was not binding for the relevant year but was required to be considered as relevant persuasive material; this issue was decided in favour of the assessee.

Issue (ii): Whether comparables accepted in the preceding year could be excluded solely by applying a turnover filter without establishing a material impact on margins.

Analysis: The seven companies had been accepted in the immediately preceding year, with no finding of any material change in the FAR profile or circumstances. Functional similarity remained the primary comparability consideration. No specific finding established that turnover differences materially affected the operating margins of the excluded companies.

Conclusion: The seven companies could not be excluded solely on the turnover filter and were directed to be retained, subject to other applicable comparability requirements; this issue was decided in favour of the assessee.

Issue (iii): Whether a comparable having aggregate related-party transactions exceeding the adopted threshold could remain in the final comparable set.

Analysis: Aggregate related-party transactions of the concerned comparable were 28.48%, exceeding the 25% threshold. Segregating related-party income and expenditure did not address whether the comparable's overall profitability was influenced by controlled transactions.

Conclusion: The comparable failed the related-party transaction filter and was directed to be excluded from the final comparable set; this issue was decided in favour of the assessee.

Issue (iv): Whether a transfer-pricing adjustment was sustainable where the assessee's margin fell within the arm's length range.

Analysis: On exclusion of the two disputed comparables, the assessee's operating margin of 10.23% fell within the 35th to 65th percentile range of 4.29% to 22.63%. The computation and the assessee's operating margin were undisputed.

Conclusion: No transfer-pricing adjustment was warranted because the assessee's margin was within the arm's length range; this issue was decided in favour of the assessee.

Final Conclusion: The transfer-pricing adjustment was deleted, with the comparable analysis required to reflect the directed inclusions and exclusion.

Issues: Whether the deletion of business income wrongly processed under Section 143(1) and mechanically adopted in the scrutiny assessment under Section 143(3) was justified.

Analysis: The returned computation disclosed nil business income, whereas the CPC processed business income at Rs. 2,99,65,837 without a show-cause and the Assessing Officer adopted that figure in the assessment without an independent basis. As the adjustment under Section 143(1) and the addition in the Section 143(3) assessment concerned the same matter, the intimation merged into the scrutiny assessment. The assessee could consequently challenge the addition in appeal against the assessment order, and the appellate authority had jurisdiction to grant relief after verification of the record.

Conclusion: The deletion of the unsustainable business-income addition and the consequential recomputation in accordance with the returned income are sustained, in favour of the assessee.

Issues: Whether cash deposits in the assessee's bank account, supported by agricultural-land records and Agricultural Produce Market Committee sale bills, could be treated as unexplained money.

Analysis: The assessee's ownership and cultivation of agricultural land was undisputed. Records of landholding, monthly sale summaries and sale bills issued by the government-controlled Agricultural Produce Market Committee substantiated sale of agricultural produce and receipt of cash. The omission of crop particulars in revenue records, absence of purchase vouchers for seeds and pesticides in small-scale agricultural activity, and non-reporting of exempt agricultural income in earlier or subsequent returns did not discredit the evidence. No independent verification or contrary material was brought to disprove the agricultural activity or the genuineness of the sale bills.

Conclusion: The cash deposits represented agricultural income and could not be assessed as unexplained money under Section 69A of the Income-tax Act, 1961; the issue was decided in favour of the assessee.

Issues: Whether interest-free, repayable housing assistance to financially needy persons constitutes charitable activity under section 2(15) and supports renewal of registration under section 12AB of the Income-tax Act, 1961.

Analysis: Relief of the poor under section 2(15) is independent of the residuary general-public-utility limb and is not confined to outright grants or persons wholly without income. Interest-free financial assistance for obtaining reasonable residential accommodation may constitute such relief where beneficiaries are selected on genuine financial need, the trust receives no interest, commission, fee, mark-up or other commercial return, and recoveries are redeployed for similar charitable assistance. A structured process, safeguards for recovery, post-dated cheques, monitoring of repayments, scale of operations and recycling of funds do not, by themselves, establish a money-lending or micro-finance business. The accounts prima facie reconciled the opening balances, disbursements, recoveries and closing balances and did not disclose income from housing loans. The alleged breach of prescribed investment modes was unsupported because no specific non-compliant investment or deposit was identified.

Conclusion: Interest-free housing loans to genuinely financially needy persons can constitute relief of the poor and charitable activity; the rejection of registration cannot rest merely on the repayable and organised nature of the scheme. The eligibility for registration requires limited verification of beneficiary need, loan terms, absence of commercial return and redeployment of recoveries, following which registration shall be granted if the stated parameters are satisfied.

Issues: Whether an assessment made pursuant to a revision order can survive after that revision order has been quashed, merely because the Revenue's challenge to the quashing order remains pending.

Analysis: The revision order under Section 263 had been quashed and was consequently not subsisting when the consequential assessment was made under Section 143(3) read with Section 263. That quashed order was the jurisdictional foundation for the assessment. The pendency of an appeal against the quashing order did not preserve the Assessing Officer's jurisdiction or operate as a stay of the quashing order.

Conclusion: The consequential assessment had no surviving legal foundation and was invalid; the issue was decided in favour of the assessee.

Issues: (i) Whether transfer-pricing comparables may be rejected or selected without satisfying the statutory comparability requirements, and when the Tribunal's determination is reviewable under section 260A; (ii) Whether turnover and related-party transaction filters adopted for selecting comparables were sustainable; (iii) Whether foreign-exchange gain or loss is an operating item for determining the arm's length price; (iv) Whether the burden concerning comparables shifts after redetermination by the Transfer Pricing Officer and whether comparables may be introduced or excluded at the appellate stage; (v) Whether the 5% variation under section 92C(2) is a standard deduction and whether section 92C(2A) applies retrospectively; (vi) Whether working-capital adjustment warrants interference in an appeal under section 260A; (vii) Whether the Tribunal may follow its earlier comparability findings where the relevant facts remain identical; (viii) Whether a cross-objection is maintainable in an appeal under section 260A.

Issue (i): Whether transfer-pricing comparables may be rejected or selected without satisfying the statutory comparability requirements, and when the Tribunal's determination is reviewable under section 260A.

Analysis: Section 92C(3) permits displacement of the taxpayer's arm's length price only upon the existence of one or more specified statutory conditions. Comparability must satisfy the factors under Rule 10B, including functions performed, assets employed, risks assumed, contractual terms and market conditions. Substitution of taxpayer-selected comparables by a standard departmental set, without the required statutory exercise, is impermissible. Inclusion or exclusion of comparables is ordinarily a factual and data-driven determination; interference under section 260A is confined to demonstrated breach of the Act or Rules or perversity.

Conclusion: Comparable-selection findings that conform to section 92C and Rule 10B and are not shown to be perverse do not give rise to a substantial question of law. The challenged exclusions based on functional dissimilarity, abnormal margins, lack of segmental information and other supported comparability distinctions were not interfered with.

Issue (ii): Whether turnover and related-party transaction filters adopted for selecting comparables were sustainable.

Analysis: Company size, brand value, bargaining power, intangible assets and economies of scale can materially affect comparability and profitability. The upper turnover threshold of Rs.200 crores was founded on a rational comparability basis. A related-party transaction filter is intended to minimise the effect of controlled transactions on comparable margins; a lower threshold is preferable where sufficient reliable comparables are available.

Conclusion: The upper turnover filter of Rs.200 crores and the 15% related-party transaction filter were sustained. A higher related-party transaction threshold of 20% or 25% may be adopted only upon a recorded finding that sufficient comparables satisfying the lower threshold are unavailable.

Issue (iii): Whether foreign-exchange gain or loss is an operating item for determining the arm's length price.

Analysis: Foreign-exchange fluctuation is an operating item only where it is directly and intrinsically connected with the relevant international transaction. A gain or loss merely attributable to business operations, but not derived from or directly linked to the international transaction, cannot enter operating revenue or operating cost. The required nexus is fact-specific and must be established by the taxpayer claiming operating treatment.

Conclusion: Foreign-exchange gain or loss is includible as an operating item only on proof of direct nexus with the international transaction. The foreign-exchange issues in the concerned appeals were remitted to the Transfer Pricing Officer for this factual verification.

Issue (iv): Whether the burden concerning comparables shifts after redetermination by the Transfer Pricing Officer and whether comparables may be introduced or excluded at the appellate stage.

Analysis: The taxpayer initially bears the burden of determining and substantiating the arm's length price with prescribed documentation. Where the Transfer Pricing Officer rejects that determination and substitutes or excludes comparables, the Transfer Pricing Officer must justify that exercise. Updated and reliable current-year data may become available after filing the return; Rule 10B(5) permits its use during arm's length price determination.

Conclusion: The burden depends upon the party seeking inclusion or exclusion of a comparable. There is no absolute bar on appellate inclusion or exclusion of comparables based on subsequently available reliable data, provided the requirements of section 92C and Rule 10B are satisfied.

Issue (v): Whether the 5% variation under section 92C(2) is a standard deduction and whether section 92C(2A) applies retrospectively.

Analysis: The arithmetical mean determined under section 92C(2) must be compared with the actual international-transaction price. The prescribed percentage operates only as a tolerance range within which no adjustment is required; it is not deductible from the arm's length price before measuring the variation. Section 92C(2A), inserted by the Finance Act, 2012, withdraws the earlier option where the variation exceeds the prescribed range.

Conclusion: The 5% variation is not a standard deduction. Section 92C(2A) applies retrospectively from assessment year 2002-03; the Tribunal's contrary findings were set aside and the affected matters were remitted for fresh determination in accordance with this ruling, in favour of the Revenue and against the assessee.

Issue (vi): Whether working-capital adjustment warrants interference in an appeal under section 260A.

Analysis: Working-capital adjustment is a comparability adjustment under Rule 10B(3), intended to neutralise material effects of differences in receivables, payables, inventory, financing costs and credit periods. Its necessity, method and quantum are fact- and data-dependent; no fixed statutory formula governs it.

Conclusion: Working-capital adjustment is not a selection filter and ordinarily remains a factual determination not open to interference absent breach of the Act or Rules or perversity.

Issue (vii): Whether the Tribunal may follow its earlier comparability findings where the relevant facts remain identical.

Analysis: An earlier functional, assets and risks analysis concerning a comparable may be followed for the same or comparable assessment years where the relevant factual profile continues unchanged. A different result may be sought only by establishing that the earlier finding was erroneous or that material facts differ.

Conclusion: Reliance on earlier comparability findings is permissible where identical facts and functional characteristics persist; such reliance does not, by itself, violate section 92C or Rule 10B.

Issue (viii): Whether a cross-objection is maintainable in an appeal under section 260A.

Analysis: The statutory appeal framework under section 260A does not provide for maintenance of a cross-objection.

Conclusion: The cross-objection was not maintainable and stood dismissed.

Final Conclusion: The transfer-pricing determinations based on sustainable factual comparability findings, including the turnover, related-party transaction and working-capital conclusions, remain undisturbed. Fresh adjudication is required on the identified foreign-exchange nexus questions, the affected comparables linked to the revised section 92C(2A) position, and the arm's length price consequences of the ruling on the statutory tolerance range.

Issues: Whether a reassessment notice for Assessment Year 2015-16 issued on 31 March 2021 was validly sanctioned by the competent authority under the pre-amendment reassessment regime.

Analysis: The notice fell within the period governed by the pre-amendment regime. The extension of time for sanction preserved the applicability of Section 151(2), under which approval for a notice issued within four years from the end of the relevant assessment year had to be granted by the Joint Commissioner. Sanction by the Principal Commissioner, who was the authority specified under Section 151(1) for notices beyond that period, did not satisfy the statutory requirement. Where sanctioning power is vested in a distinct specified authority, the prescribed authority alone must record satisfaction.

Conclusion: The reassessment notice was invalid for want of sanction by the competent authority; the notice, objection-disposal order, assessment order, demand notice and consequential proceedings were quashed and set aside.

Issues: Whether voluntary compensation received for diminution in the value of unexercised employee stock options following a corporate divestment is taxable under the head "Salaries" as a perquisite or as profits in lieu of salary.

Analysis: Section 17(2)(vi) requires a taxable perquisite to arise from the allotment or transfer of specified securities, with valuation premised on exercise of the option. The options were neither exercised nor cancelled, surrendered, forfeited, repurchased, allotted or transferred, and the assessee retained the same options after the payment. The proximate cause of the payment was the divestment and resulting diminution in option value, not employment services. The payment was a voluntary payment, made without statutory or contractual obligation and to all option holders; it therefore lacked the requisite employment nexus. The absence of an employment nexus also excluded treatment as profits in lieu of salary under Section 17(3)(ii). Tax deduction at source and the payer's reporting of the amount as salary could not independently establish chargeability.

Conclusion: The compensation is neither a perquisite under Section 17(2)(vi) nor profits in lieu of salary under Section 17(3)(ii), and cannot be taxed under the head "Salaries".

Issues: (i) Whether the revisionary notice and order under Section 263 were without jurisdiction because the officer, after assuming charge as Chief Commissioner, issued the notice and acted in the capacity of Principal Commissioner without a Central Board of Direct Taxes authorisation; (ii) Whether revision under Section 263 was sustainable on the allegation that the Assessing Officer failed to examine the annual letting value of the assessee's properties.

Issue (i): Whether the revisionary notice and order under Section 263 were without jurisdiction because the officer, after assuming charge as Chief Commissioner, issued the notice and acted in the capacity of Principal Commissioner without a Central Board of Direct Taxes authorisation.

Analysis: Although Section 263 permits a Chief Commissioner to exercise revisionary power, the notice was issued by an officer holding formal charge as Chief Commissioner while using the designation and signature of Principal Commissioner. Principal Commissioner and Chief Commissioner are distinct income-tax authorities under Section 116. Exercise by one authority of the functions assigned to another required an express authorisation under Section 120(2), which was absent. A statutory power required to be exercised by a specified authority must be exercised in the prescribed manner.

Conclusion: The revisionary notice was without jurisdiction and the consequential revisionary order was void in law, in favour of the assessee.

Issue (ii): Whether revision under Section 263 was sustainable on the allegation that the Assessing Officer failed to examine the annual letting value of the assessee's properties.

Analysis: The assessment record showed inquiries into the properties, their ownership, use, and annual letting value. Properties genuinely used for the assessee's professional activities did not attract annual letting value under Section 22, and gifted properties were no longer owned by the assessee. The Assessing Officer's acceptance of the disclosed treatment was a plausible view. Explanation 2 to Section 263 did not apply merely because the Principal Commissioner preferred further inquiry; no failure of inquiry, specific error, or material demonstrating prejudice to revenue was established. The revision rested on a change of opinion.

Conclusion: The conditions for revision under Section 263 were not satisfied, and the revision on the annual-letting-value issue was unsustainable, in favour of the assessee.

Final Conclusion: The assessment order remained legally valid, and the revisionary proceedings had no legal foundation.

Ratio Decidendi: Revisionary jurisdiction cannot be exercised by an authority acting under an incorrect designation without statutory authorisation, and an assessment reached after inquiry on a plausible view cannot be revised merely for further inquiry or change of opinion.

Issues: (i) Whether long-term capital gains from sale of listed shares, supported by stock-exchange trades, securities transaction tax, demat records and banking channels, could be assessed as unexplained cash credits in the absence of evidence linking the assessees to price manipulation; (ii) Whether deletion of penalty for concealment could be sustained after deletion of the underlying quantum additions; (iii) Whether reopening or reassessment proceedings founded on the assessment findings invalidated in the quantum matters could survive.

Issue (i): Whether long-term capital gains from sale of listed shares, supported by stock-exchange trades, securities transaction tax, demat records and banking channels, could be assessed as unexplained cash credits in the absence of evidence linking the assessees to price manipulation.

Analysis: Under Section 260-A of the Income-tax Act, 1961, interference with the Tribunal's factual findings is confined to a substantial question of law, including perversity. The material established documented purchase and sale through recognised stock exchanges, payment of securities transaction tax, demat trail and receipt through banking channels. Though abnormal price appreciation and circumstances concerning intermediaries could create suspicion, no positive and corroborated material connected either assessee with payment of unaccounted cash, an arrangement with operators, or manipulation of the share price. The test of human probabilities remains an evidentiary tool but does not dispense with proof where primary documentary evidence remains undisplaced.

Conclusion: The gains could not be treated as unexplained cash credits under Section 68 of the Income-tax Act, 1961, and were eligible for exemption under Section 10(38) of the Income-tax Act, 1961; the issue is decided in favour of the assessees.

Issue (ii): Whether deletion of penalty for concealment could be sustained after deletion of the underlying quantum additions.

Analysis: The penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961 rested on the same additions that were found unsustainable for want of cogent and corroborated evidence.

Conclusion: Deletion of the penalty is sustained; the issue is decided in favour of the assessees.

Issue (iii): Whether reopening or reassessment proceedings founded on the assessment findings invalidated in the quantum matters could survive.

Analysis: The challenged reopening and reassessment measures were founded upon the assessment orders whose additions had not survived judicial scrutiny. Their stated foundation was consequently unavailable.

Conclusion: Reopening or reassessment proceedings based on those invalidated assessment findings cannot stand; the issue is decided in favour of the assessees.

Final Conclusion: The share-sale gains retained their exempt capital-gain character, the related concealment penalties lacked a surviving basis, and derivative reassessment measures founded on the invalidated additions were rendered unsustainable.

Ratio Decidendi: Suspicion arising from unusual share-price movements or third-party conduct cannot displace documented securities transactions or sustain an addition under Section 68 without positive, corroborated evidence linking the assessee to the alleged manipulation.