Expenditure incurred for acquiring or expanding an undertaking falls within the specific preliminary-expense amortisation regime and cannot be claimed as a residual revenue deduction. Repairs to leased premises remain deductible except to the extent capital in nature, while depreciation on guest-house flats and office equipment was accepted on consistent prior treatment. Intellectual-property renewal costs require evidence that they protect existing rights rather than create a capital asset. For exempt-income expenditure, interest disallowance is unwarranted where own funds exceed investments without a borrowing nexus, but book profit must include the full Rule 8D disallowance. Transfer-pricing loan and guarantee benchmarking was sustained; executive remuneration requires fresh verification.

Uncorroborated entries in a diary seized from a third party cannot, by themselves, sustain an addition for undisclosed income where no independent evidence links the assessee to the alleged land transactions or receipts. No relevant documents were found during the assessee's search, the assessee denied ownership or dealings in the plots, and neither the person from whom the diary was seized nor the alleged purchaser admitted that the entries related to the assessee. As the addition rested on presumption without corroborative material, it was unsustainable and deleted.

Cash deposits during demonetisation attributed to recorded cash sales cannot be treated as unexplained cash credits merely because trading patterns departed from prior periods. The addition requires evidence that the sales explanation is unacceptable, including absent stock, unsupported purchases, or material defects in trading results. Audited books, stock records, purchase and inventory details, and VAT returns supporting the availability and sale of goods substantiate the deposits where no adverse third-party verification or discrepancies are established. Suspicion regarding related-party transactions or possible VAT-sales manipulation cannot replace proof. Taxing cash receipts already recorded as sales, without disproving those sales, would amount to double taxation.

Revision under section 263 cannot be sustained merely because the Assessing Officer allegedly allowed an excessive deduction for provision for bad and doubtful debts. The provision recorded in the profit and loss account was added back in computing taxable income, while the deduction under section 36(1)(viia) was separately quantified. The Assessing Officer sought and examined details of the provision and ICDS adjustments, including supporting computations. Where an assessment follows inquiry and application of mind, revision cannot be based on a different view; inadequate inquiry differs from absence of inquiry. The assessment was not erroneous or prejudicial to Revenue interests, and the revisionary order was quashed.

Regular registration under Section 12AB and approval under Section 80G must be sought by a provisionally registered institution at least six months before provisional registration expires or within six months of commencing activities, whichever is earlier. Where activities commenced on 28.03.2024 and provisional registration remained valid through A.Y. 2025-26, applications filed on 22.09.2024 were within both applicable deadlines. The corresponding requirements for provisional Section 80G approval operate pari materia. Rejection solely on limitation was therefore unsustainable, requiring both applications to be examined on their merits.

Unexplained cash-deposit additions require comprehensive consideration of evidence supporting debtor recoveries and the taxpayer's cash-collection business model. Relevant material included debtor ledgers, activation and subscription records, local cable operator reports, cash books and bank statements, while concerns arose from demonetisation-period deposits, incomplete third-party confirmations and discrepancies in cash books and debtor ledgers. Full appraisal and, where necessary, remand verification of this material is required before determining the sustainability of the addition or the validity of rejecting the books of account.

Transfer-pricing adjustments for idle capacity, customs duty, provision reversals, miscellaneous receipts, business-support income, comparables, marketing-support characterisation and AE/non-AE segmentation require fresh verification on supporting evidence. Provision reversals may receive operating treatment where the original provisions were operating expenses, while business-support income is non-operating with corresponding expenses excluded. Opening inventory must be adjusted after verification where an obsolescence provision was disallowed previously. Foreign-exchange loss on ECB borrowings used for domestic assets after the assets are put to use is revenue expenditure where the foreign-asset rule does not apply. Software application licences qualify for computer-rate depreciation. Salary reimbursements for seconded employees under the recipient's control, already subject to salary withholding, are not separately taxable as technical-service fees.

Penalty for failure to obtain a tax audit under Section 271B presupposes the existence of books of account capable of audit under Section 44AB. Where turnover is estimated from bank deposits because books were neither maintained nor produced, failure to maintain books is distinct from failure to obtain an audit of existing books and attracts separate statutory consequences. Estimated turnover exceeding the audit threshold does not, by itself, establish a Section 271B default when the assessment proceeds on the basis that no books exist. Penalty under Section 271B was therefore not leviable and was directed to be deleted.

For reassessment initiated beyond three years where alleged escaped income exceeds the statutory threshold, Section 151(ii) requires sanction from the higher specified authority. Approval by the Principal Commissioner of Income-tax, rather than the Principal Chief Commissioner of Income-tax, does not satisfy that jurisdictional precondition for issuing a notice under Section 148. The reassessment notice and consequential assessment were therefore without jurisdiction and were quashed in favour of the assessee.

Interest-free or concessional advances made under a construction contract did not establish private benefit or diversion of charitable funds where no evidence showed that specified persons benefited, the contract was overpriced, or terms were not at arm's length. Section 40A(2)(a) did not apply because the interest expenditure was paid to unrelated banks, while the adjustment concerned interest not charged on advances; exemption under Sections 11 and 12 therefore remained available. Donations to registered charitable institutions and scholarships were valid application of charitable income when supported by documentary evidence and directed to charitable activities. The additions were deleted.

Reassessment jurisdiction cannot rest on an incorrect and unverified computation of alleged escaped income. The recorded reasons aggregated two underlying figures wrongly, and the taxpayer's response established that the stated escaped-income figure did not arise from the available material. Proceedings had initially been dropped after that response, but a reassessment notice was later issued on the same erroneous basis. The eventual addition was materially different from the figure recorded for reopening, indicating no verified connection between the reasons and the assessment. Reopening based on factually incorrect material without independent verification constitutes non-application of mind and invalid assumption of jurisdiction.

Where regular books, audited accounts, stock records, sales bills, ledger accounts and bank receipts remain unrejected, entire disputed sales cannot be assessed as unexplained income merely on third-party investigation findings. In the absence of cross-examination of material witnesses and a finding that the taxpayer's documentary evidence was unacceptable, the accepted trading and sales records support taxation only of the embedded profit or commission element. Commission income at 0.5% of the impugned purchases is taxable, and additions based on the full disputed sales are modified accordingly.

Denial of a charitable trust's Section 11 exemption during return processing falls outside permissible adjustment where the disallowance is made without affording an opportunity to respond. Existing registration under the earlier regime, together with provisional registration under the revised regime, supports entitlement to claim the exemption; rejection on that basis is unjustified. The Section 11 disallowance was therefore deleted in favour of the trust.

Revisionary jurisdiction under Section 263 requires an assessment order to be both erroneous and prejudicial to the Revenue. Examination of the assessment record showed that the Assessing Officer had obtained and considered evidence of the non-resident shareholder's identity, financial capacity, audited financial statements, tax returns, remittance records and correspondence. Lack of detailed discussion in the assessment order did not prove absence of inquiry, and a permissible view taken after inquiry could not be revised merely because further inquiry was considered desirable. A direction for fresh examination required a clear finding of legal error supported by at least minimal independent inquiry. As no such error was established, the revisionary order was invalid and the direction to re-examine share capital was quashed.

Profit attribution to an Indian dependent agency permanent establishment may exceed arm's length remuneration where the transfer-pricing analysis does not capture its actual functions and risks. A mutual agreement procedure rate applies only to covered years and may not extend to later years if the permanent establishment's activities materially differ. On the stated facts, attribution was restricted to 12% of advertisement revenue rather than 15%, while the claim that arm's length remuneration eliminated residual attribution was rejected. Credit for eligible tax paid by the Indian permanent establishment on advertisement income requires verification and quantification by the Assessing Officer.

Unpaid GST collected from customers cannot be disallowed under Section 43B where it was neither debited to the profit and loss account nor claimed as a deduction; the GST addition was therefore deleted. Payments described as reimbursements of legal and professional expenses may be disallowed under Section 40(a)(ia) when no evidence establishes that they were genuine cost reimbursements without markup; the disallowance was sustained. The governing principle is that a payment-based disallowance cannot apply to a liability not claimed as a deduction in computing income.

Transfer-pricing treatment of advertising, marketing and promotion expenditure requires evidence of an arrangement, understanding or concerted action with an associated enterprise; reimbursement alone does not establish an international transaction, and the Bright Line Test or intensity-based benchmarking cannot apply without one. Comparable selection and margin computation must reflect functional similarity, operational income and expenses, foreign-exchange gains linked to operations, working-capital effects and adjustments limited to associated-enterprise transactions. Royalty embedded in an already benchmarked licensed manufacturing segment should not be separately tested under CUP where comparables lack meaningful similarity, as this may duplicate adjustment. Distinct import and support-service transactions may be separately benchmarked where their functional, asset and risk profiles differ; Berry Ratio may be appropriate where goods costs are pass-through costs.

Third-party search material used to assess another person requires recourse to section 153C, including recording the requisite satisfaction. An addition for alleged on-money receipts cannot be sustained in a regular assessment under section 143(3) where it is founded on documents and information obtained during a third-party search and the searched person was assessed under the search-assessment regime. The addition under section 69A was therefore unsustainable and liable to be deleted.

Anonymous donations received by a trust claiming exemption fall under the special tax regime for such donations. The prescribed portion is taxable at 30 per cent, and the regime does not require the trust to maintain donor identity, name or address records for anonymous contributors. Treating the same receipts as unexplained cash credits solely because donor particulars are unavailable is inconsistent with that specific framework. Anonymous donations therefore remain taxable under the special provision and cannot be assessed as unexplained cash credits on the basis of absent donor-identification records.

Revisional jurisdiction under section 263 requires an assessment order to be both erroneous and prejudicial to the interests of the Revenue. Where the Assessing Officer examined purchase and sale transactions during reassessment, obtained relevant details, and made a disallowance on the available material, revision cannot rest solely on a preference for further enquiry or a different view of the same evidence. Inconsistent directions to treat amounts as sales while considering corresponding transactions as bogus purchases do not identify a specific prejudicial error. Matters already pending in appeal are subject to the limitation in Explanation 1(c) to section 263.