Recorded cash on hand in the cash book and audited accounts explained demonetisation-period banknote deposits where the Assessing Officer identified no defect in the cash book or dispute regarding the recorded balance. Delayed or staggered deposit of part of the cash, including after an earlier accepted deposit, did not by itself undermine the documented source. The deposits therefore could not be treated as unexplained money.

Revenue expenditure incurred for business remains deductible under section 37 where the tax authorities reject a claim for capital scientific-research expenditure under section 35(1)(iv) but characterise the expenditure as revenue in nature. The disallowance of that expenditure was therefore to be deleted, subject to satisfaction of section 37 requirements. Customs-duty reimbursement claimed for an amount paid by a third party requires factual verification of the payment and reimbursement; that issue was remitted for fresh verification.

Penalty for concealment of income or furnishing inaccurate particulars cannot be sustained where the statutory notice retains both alternative charges without identifying the precise allegation. Effective opportunity to respond requires a notice that clearly specifies the applicable limb. Where penalty initiation proceeds on concealment of income but the penalty is imposed for furnishing inaccurate particulars, the inconsistency further invalidates the penalty. Consequently, penalty under Section 271(1)(c) is not leviable when the notice is vague and the charge adopted at imposition differs from that initiated.

Cash-credit additions for deposits and funds received from relatives cannot be sustained where documentary evidence establishes the source of funds. Sale proceeds of gold ornaments, confirmations from NRI relatives, and their bank statements supported the credits. Material placed on record cannot be rejected without further enquiry from the donors; an assessee cannot be prejudiced by the Assessing Officer's failure to verify that evidence. The Section 68 addition was therefore deleted.

Section 41(1) requires remission or cessation of an existing trading liability; a finding that creditors are non-genuine does not by itself establish that an outstanding liability has ceased. Non-genuineness may instead concern the allowability of expenditure linked to the underlying transactions. Where outstanding creditor balances are subsequently discharged through banking channels, that payment negates an inference of cessation during the relevant assessment year. Additions treating such balances as income on alleged cessation of liability are therefore unsustainable and liable to be deleted.

For reassessment following a return filed in response to a notice under Section 148, issuance of a notice under Section 143(2) is a prerequisite to a valid assessment. Section 292BB cures defects involving service, delayed service, or improper service of a notice where the assessee participates in proceedings, but does not cure complete non-issuance. Accordingly, an assessee's participation without objection cannot validate reassessment proceedings where no notice under Section 143(2) was issued, rendering the reassessment invalid.

Unexplained bank-deposit additions require fresh verification where buyers' receipts and evidence of tea-garden cultivation have not been adequately examined. The Assessing Officer must determine whether deposits represent tea-sale receipts rather than unexplained money. Claims for exemption under section 10(26) and treatment of income as agricultural income also require verification of the taxpayer's qualifying status, the link between buyers' receipts and deposits, and the character and taxability of the income. Fresh adjudication must follow an adequate opportunity of hearing; the appellate order and assessment issues are restored for fact-based reconsideration.

Revisionary jurisdiction under Section 263 requires a legally valid assessment order as its foundation. Where the reassessment notice under Section 148 is issued after expiry of the limitation period prescribed by Section 149(1)(b), the resulting reassessment under Sections 147 and 144B lacks legal validity. Electronic proceedings records may establish the actual date of issue despite inconsistent dates recorded in assessment or revision orders. Consequently, revision under Section 263 cannot be sustained when it is founded on an invalid, time-barred reassessment order.

Deduction under section 80P is admissible on business profits enhanced by disallowance of expenditure debited to the profit and loss account. Circular No. 37/2016 recognises that disallowances related to an eligible business increase the profit base for Chapter VI-A deductions. Where provisions claimed as expenditure are disallowed and thereby increase business income, the resulting enhanced profit qualifies for the section 80P deduction.

Deduction for special reserves is confined to the prescribed percentage of profits derived from eligible housing-finance business. Interest expenditure must be apportioned between eligible and non-eligible businesses using their respective turnover when computing eligible-business profits. Complete disallowance is inappropriate; where the taxpayer's allocation basis is not available from the record, the computation requires verification under the turnover-based allocation method.

Addition for alleged undervaluation of imported paper cup machines under Section 69 could not be sustained after CESTAT set aside the customs valuation finding underlying it. No appeal was filed against the CESTAT order concerning the assessee, while the customs appeal involving comparable imports was non-maintainable. With no independent evidence of undervaluation beyond customs information that no longer supported the allegation, deletion of the Section 69 addition was upheld.

Interest under Section 234A is mandatory and remains chargeable despite pending quantum proceedings. Its amount depends on the income ultimately determined in the quantum appeal. Once taxable income is finally settled, the interest liability must be recomputed and adjusted to conform to that determination. The chargeability of interest is therefore maintained, while its final quantum remains contingent on the outcome of the income determination proceedings.

Income surrendered during a survey for excess cash, stock discrepancies, unrecorded creditors, debtors and construction investment remains business income where the taxpayer's sole demonstrated source is its electrical and electronic goods business, no independent non-business source is shown, and the survey disclosure links the amounts to business activities. Incomplete books requiring reconciliation of cash and stock discrepancies do not, on those facts, justify characterising the amounts as unexplained investment or unexplained money under sections 69 and 69A. The deemed-income rate under section 115BBE consequently does not apply.

Reassessment initiated to verify the source of investment in immovable property cannot support an addition on a separate issue where the disclosed source is accepted and no income is assessed on the recorded reopening ground. An addition for the difference between stamp-duty value and actual purchase consideration under Section 56(2)(vii)(b) was therefore deleted. The reassessment scope remained tied to the issue forming the basis for reopening, preventing a surviving addition based solely on stamp-duty valuation differences.

Revisionary proceedings require a meaningful and effective opportunity of hearing before an assessment is treated as erroneous and prejudicial to Revenue interests. Uploading a revision notice shortly before the scheduled hearing and passing the revisionary order immediately thereafter does not provide adequate time to respond. Such procedure breaches the principles of natural justice, rendering the revisionary order invalid and requiring a fresh reasonable opportunity of hearing.

Section 270A permits a 200% penalty for under-reporting only where the income results from misreporting within a specified circumstance under section 270A(9). Withdrawal during assessment of an inadmissible section 80IAC deduction, claimed after an erroneous selection of the old tax regime despite opting for section 115BAA taxation, does not itself establish misrepresentation or suppression of facts. The Assessing Officer must identify and prove the applicable statutory misreporting circumstance. Applying strict interpretation to penal provisions, the enhanced penalty for under-reporting resulting from misreporting was unsustainable.

Transfer-pricing treatment of related-party balances permits netting overdue receivables against overdue payables when both arise with the same associated enterprise and relevant details are available; where payables exceed receivables, no notional-interest adjustment survives. Foreign-currency external commercial borrowings require LIBOR-based interest benchmarking, with the spread determined by tenure and risk; LIBOR plus 200 basis points was retained on consistency. Royalty cannot be assigned an arm's length price of nil through a benefit test outside prescribed methods when technical support is established. Entity-level TNMM aggregation with connected transactions supported the royalty payment, as the taxpayer's margin exceeded comparables, rendering the nil-price adjustment unsustainable.

External development charges paid to the Haryana Urban Development Authority before financial year 2017-18 constituted payments to a contractor for external development works under an arrangement with the State Government. Tax was therefore deductible at source under Section 194C even without a formally executed contract between the payer and the Authority. The Authority did not qualify as Government for the tax-deduction exemption, and no exemption or lower-deduction certificate applied. Non-deduction consequently rendered the payer an assessee in default, with liability under Sections 201(1) and 201(1A).

Transfer-pricing comparability must reflect prevailing market conditions and material differences affecting profitability. COVID-related conditions may make benchmarking a tested party's single-year profit level indicator against comparables' weighted average margins for multiple years inappropriate; contemporaneous single-year data should then be used. Proposed comparables require fresh evaluation where submissions and supporting material have not been properly considered. Intra-group technical, operational and consultancy services should not be assigned a nil arm's length price without properly examining agreements, invoices, email extracts and other evidence of service receipt. The transfer-pricing study should be redone after considering the taxpayer's evidence and submissions.

Failure to adjudicate a specifically raised ground challenging recharacterisation of IT and ITeS services as knowledge process outsourcing constituted a mistake apparent from the record under section 254(2) of the Income-tax Act. The earlier determination addressed comparability but omitted the distinct recharacterisation issue. Rectification was therefore available, and the Assessing Officer was directed to examine the documentary evidence and determine whether the services fall within the scope of knowledge process outsourcing.