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.

Cash capital contributed by identified partners cannot be treated as unexplained cash credits in the partnership firm's hands merely because the partners' sources of income are not established. The firm must establish the identity of the contributing partners, while any inquiry into the source of an unexplained contribution is assessable, if at all, in the individual partners' assessments. Accordingly, the cash-capital addition made in the firm's assessment was deleted.

Reassessment jurisdiction remains valid where reasons to believe are recorded and the prescribed statutory procedure is followed. Seized ledger entries maintained by a family member cannot support separate substantive additions in another person's hands when the recorded amounts have been owned and substantively assessed in the ledger keeper's hands. Protective additions in a company's assessment, being dependent on those substantive additions, likewise fail. The principle prevents duplicate substantive taxation of the same ledger amounts across different persons.

Requisition proceedings under Section 132A governed by the pre-existing Section 153A assessment regime had to be initiated and completed within the limitation prescribed by Section 153B. Expiry of that period could not be circumvented by invoking the reassessment procedure under Sections 148A and 148 introduced from 1 April 2021. The relevant Explanation to Section 148 applied only to searches or requisitions conducted on or after that date. A challenge to the statutory procedure was distinct from an objection to territorial jurisdiction under Section 124(3). Consequently, the reassessment notice and proceedings were invalid, and the penalty founded on the resulting reassessment could not survive.

Depreciation on goodwill arising from amalgamation is allowable under Section 32(1)(ii) where the goodwill represents excess consideration over the amalgamating entities' net asset value and is supported by the amalgamation scheme and valuation. Consistent prior-year allowance should continue absent distinguishing facts or evidence of an artificial goodwill arrangement. Reimbursement of employee stock option costs to a group entity is deductible under Section 37(1) when it constitutes business-related employee compensation and the liability accrues under the mercantile system. The claims remain allowable where identical claims were accepted in earlier years and no distinguishing facts are established.

Enhanced business income arising from a sustained addition qualifies for a corresponding enhanced deduction under section 80P where the deduction is linked to business profits. CBDT guidance recognises that disallowances increasing business profits require Chapter VI-A deductions to be recomputed on the enhanced income. The enhanced business profits therefore remain eligible for deduction under section 80P, increasing the allowable deduction to reflect the addition.

Interest on borrowings is deductible against dividend income only to the extent a direct factual nexus exists between the borrowing and the dividend-yielding investment; investments funded from sale proceeds or available interest-free funds do not support further interest deduction. Industrial-unit deduction remained available on the established position followed for prior years. Security deposits paid to obtain leased employee accommodation do not create taxable notional interest, because tax liability requires actual income rather than assumed returns. Interest on borrowings for new machinery and overheads incurred during trial runs are revenue expenditure. These principles support the assessee's positions on the identified issues.

Reassessment cannot be initiated on transactions already scrutinised in the original assessment merely by revisiting the same material. The original scrutiny examined purchases from high-risk billers, GST reconciliations, supplier confirmations, bank-payment evidence and books of account, rejected the books, and estimated net profit on total sales. As the alleged escaped income was subsumed within that assessment, reopening represented an impermissible change of opinion. The reassessment initiation was therefore invalid.

Reassessment following a scrutiny assessment was invalid where the deduction claim, partners' capital details and gold purchases from a sister concern had been fully disclosed and were available during the original assessment. The gold-pricing issue had already been examined, while the explanation regarding fineness and the alleged notional price difference was not addressed in rejecting objections. The interest-based allegation also lacked foundation because an amended partnership deed had rendered the interest clause inoperative, leaving no contractual obligation to pay interest or basis for profit adjustment. Audit objections materially influenced reopening despite prior acceptance of the pricing explanation.