Supreme Court Research Team

 

  1. S.2(12A) : Books of account – Entries in loose papers/sheets are irrelevant and inadmissible as evidence. [Ss. 132, 143(3) 245D, Evidence Act, S.34]

    Entries in loose papers/sheets are irrelevant and inadmissible as evidence. Such loose papers are not “books of account” and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts.
    (WP. No. 505 of 2015, dt. 11-1-2017). (C.B.I. vs. V. C. Shukla 1998 (3) SCC 410 followed)

    Common Cause v. UOI (Shara Diaries)(SC);
    www.itatonline.org

  2. S.2(22)(e) : Deemed Dividend – The HUF is the beneficial shareholder. Even if it is assumed that the Karta is the registered shareholder and not the HUF, as per Explanation 3 to s. 2(22), any payment to a concern (i.e. the HUF) in which the shareholder (i.e. the Karta) has a substantial interest is also covered

    The Supreme Court had to consider the following question of law:

    “Whether in view of the settled principle that HUF cannot be a registered shareholder in a company and hence could not have been both registered and beneficial shareholder, loan/advances received by HUF could be deemed as dividend within the meaning of section 2(22)(e) of the Income-tax Act, 1961 especially in view of the term “concern” as defined in the Section itself?”

    HELD by the Supreme Court dismissing the appeal; “It is also found as a fact, from the audited annual return of the Company filed with ROC that the money towards share holding in the Company was given by the assessee/HUF. Though, the share certificates were issued in the name of the Karta, Shri Gopal Kumar Sanei, but in the annual returns, it is the HUF which was shown as registered and beneficial shareholder. In any case, it cannot be doubted that it is the beneficial shareholder. Even if we presume that it is not a registered shareholder, as per the provisions of section 2(22)(e) of the Act, once the payment is received by the HUF and shareholder (Mr. Sanei, Karta, in this case) is a member of the said HUF and he has substantial interest in the HUF, the payment made to the HUF shall constitute deemed dividend within the meaning of clause (e) of Section 2(22) of the Act. This is the effect of Explanation 3 to the said Section, as noticed above. Therefore, it is no gainsaying that since HUF itself is not the registered shareholder, the provisions of deemed dividend are not attracted. For this reason, judgment in C.P. Sarathy Mudaliar 1972 SCR 1076, relied upon by the learned counsel for the appellant, will have no application. That was a judgment rendered in the context of Section 2(6A)(e) of the Income-tax Act, 1922 wherein there was no provision like Explanation 3 (AY. 2006-07)”

    Gopal and Sons (HUF) v. CIT( 2017 ) 145 DTR 289 (SC)

  3. S.4 : Charge of income-tax – Capital or revenue – Voluntary subsidies (subvention) paid by a holding company to its loss making subsidiary is to protect the capital investment of the holding company and is a capital receipt in the hands of the recipient

    Allowing the appeal the Court held that; “the subvention received by the Assessee, from its parent Company in Germany in a situation where the Assessee, company was making losses is a capital receipt. (SLP No. 6946/2014, dt. 7-12-2016) (AY.1999-00, 2000-01, 2001-02)”

    Siemens Public Communications Network Ltd. v. CIT (2017) 390 ITR 1/ 291 CTR 22 (SC)

  4. S.9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services – Common facilities is not technical services – Reimbursement of a common technical computer facility is not “fees for technical services”. Amount received by way of reimbursement of expenses does not have the character of income DTAA – India-Denmark [Art. 12]

    Dismissing the appeal of the Revenue the Court held that; in order to constitute “technical services”, services catering to the special needs of the person using them must be rendered. The provision of a common facility is not “technical services”. Amount paid towards reimbursement of a common technical computer facility is not “fees for technical services”. Amount received by way of reimbursement of expenses does not have the character of income. (CA. No. 8040 of 2015, dt. 17-2-2017)

    DIT v. A.P. Moller Maersk AS (SC) ;
    www.itatonline.org

  5. S.10(23C) : Exempt income –University – Condition that university must be wholly or substantially financed by Government – Review petition was dismissed

    From the decision of the Supreme Court affirming the Dharwad Bench of the Karnataka High Court (see [2016] 384 ITR 37 (SC)) holding that the assessee did not satisfy the second requirement spelt out by section 10(23C)(iiiab) and that the assessee was neither directly nor even substantially financed by the Government so as to be entitled to exemption from payment of tax under the Act, the assessee filed a review petition :

    The Supreme Court rejected the prayer for oral hearing and dismissed the review petition holding that no case for review was made out. Decision of the Supreme Court in Visvesvaraya Technological University v. Asst. CIT [2016] 384 ITR 37 (SC) reaffirmed. (AYs. 2004-05 to 2009-10
    dt. 23-8-2016)

    Visvesvaraya Technological University v. ACIT (2016) 389 ITR 10 / 242 Taxman 247 (SC)

  6. S.10(37) : Capital gains – Exemption – Transfer of agricultural land – The fact that the assessee entered into a settlement with the Collector regarding the compensation amount does not mean that the acquisition was not “compulsory” if the prescribed procedure was  followed – Exemption was allowed. [S.148, Land Acquisition Act, 1894, S.6]

    The issue before the Court was “whether, on the facts and in the circumstances of the case, the High Court was justified in denying the claim for exemption under section 10(37) of the Income –tax Act, 1961 to the appellant”

    Reversing the judgment of the High Court the Court held that, the fact that the assessee entered into a settlement with the Collector regarding the compensation amount does not mean that the acquisition was not “compulsory” if the prescribed procedure was followed and proceedings under section 148 was quashed. (C.A No. 1607/2010, dt. 11-1-2017)( AY. 2009-10 )

    Balakrishnan v. UOI (SC);
    www.itatonline.org

  7. S.10A : Free Trade Zone – The deduction of the profits and gains of the business of an eligible undertaking has to be made independently and before giving effect to the provisions for set off and carry forward contained in sections 70, 72, and 74 [S.10B, 70, 72, 74]

    Dismissing the appeal of the Revenue the Court held that; Section 10A/10B were amended by FA 2000 w.e.f. 1-4-2001 to change “exemption” to “deduction”, the “deduction” contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. The deduction of the profits and gains of the business of an eligible undertaking has to be made independently and before giving effect to the provisions for set off and carry forward contained in ss. 70, 72 and 74. The deductions u/ss. 10A/10B are prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. (AY. 2001-02 to 2006-07)

    CIT v. Yokogawa India Limited (2017) 145 DTR 1/ 291 CTR 1(SC)

  8. S.10AA: Special Economic Zones – Newly established units – Trading activity carried by SEZ was to be considered ‘service’ eligible for exemption is a question of law – Matter remanded to High Court to decide the question of law. [S.260A]

    The High Court affirmed the finding of the Tribunal that the trading activity carried on by the special economic zone unit of the assessee was “service” eligible for exemption under section 10AA, without considering the submission of the Department that for this purpose, the Tribunal could not have relied upon the definition of “services” in the Special Economic Zones Rules, 2006, when there was no such provision under section 10AA, on appeal :

    Held, that the High Court did not consider this aspect and brushed it aside saying that the Tribunal had held it to be a “service” and that it was a question of fact. While the factual aspects of activity carried on by the assessee were not in dispute, whether that would constitute “service” within the meaning of section 10AA would be a question of law and not a question of fact. The High Court was, therefore, in error in not entertaining the plea. (AY. 2004-05)

    CIT v. Bommidala Enterprises P. Ltd. (2016) 389 ITR 1/242 Taxman 248 (SC)

  9. S.28(i) : Business income – Principle of mutuality – Company formed to deal in real estate – Shareholders allotted floor area with absolute right against share capital – Occupants given absolute right to occupy, alienate or sell property – Profit motive involved – Principle of mutuality not applicable – Maintenance deposit to be treated as business income – Review petition was dismissed. [S. 4]

    Company formed to deal in real estate. Shareholders allotted floor area with absolute right against share capital. Occupants given absolute right to occupy, alienate or sell property. Profit motive involved, therefore principle of mutuality is not applicable. That on the issue of short-term capital gains with respect to property T1 and T2 and maintenance deposit there was no infirmity in the order of the High Court so as to require any modification. On a petition for review : The Supreme Court dismissed the petition holding that no grounds were made out for review. Decision of the Supreme Court in G. S. Homes and Hotels P. Ltd. v. Deputy CIT [2016] 387 ITR 126 (SC) reaffirmed. (AY. 1996-97)

    G.S. Homes and Hotels P. Ltd. v. Dy. CIT (2016) 389 ITR 78 (SC)

  10. S.35 : Scientific research – Approval – Initial grant of approval was ordered by Finance Minister and the refusal for extension was conveyed by Director – Order of High Court striking down / refusing the extension was held to be not proper. [S.35(1)(ii), – Government of India (Transaction of Business) Rules, 1961, [R. 3]

    Assessee-company filed an application for extension of approval under section 35. Initial grant of approval was ordered by Finance Minister and same was conveyed by Director . Extension was rejected on the ground that the same was conveyed by the Director and not by the Competent authority. On writ the refusal of extension was set aside. On appeal by revenue, allowing the the appeal the Court held that, as per rule 3 of Government of India (Transaction of Business) Rules, 1961 such decisions were required to go to CBDT and thereafter to Minister, which requirement was complied with, therefore the High Court was not justified in striking down/refusing extension of approval on ground that same was passed by Director and not by Finance Minister. (AY. 2008-09)

    UOI v. Central India Institute of Medical Sciences (2016) 243 Taxman 151 / 389 ITR 4 / (2017) 291 CTR 19 (SC)

  11. S.35D : Amortisation of preliminary expenses – Expenses relating to issue of shares to public – Allowed in earlier years – Benefit to continue for ten years – Amortisation cannot be refused for subsequent year [S.37(1)]

    Allowing the appeal the Court held that the Assessing Officer had allowed the claim of the assessee in respect of the expenses on the public issue for the assessment years 1994-95 and 1996-97. Section 35D provides for amortisation of such expenses for a period of 10 years at one-tenth each year for ten years. When it was again claimed for the assessment year 1996-97, it was disallowed and on directions of the appellate authority, the Assessing Officer made physical verification of the factory premises. He was satisfied that there was expansion of the facilities to the industrial undertaking of the assessee. It was on this satisfaction that for the assessment year 1996-97 also the expenses were allowed. Once this position was accepted and the clock had started running in favour of the assessee, it had to complete the entire period of 10 years and the benefit granted in the first two years could not have been denied in the subsequent years. The decision in Brooke Bond was rendered when section 35D was not on the statute book. The assessee was entitled to the benefit of section 35D for the assessment years in question. (AY. 1999-2000, 2001-02)

    Shasun Chemicals and Drugs Ltd. v. CIT (2016) 388 ITR 1/ 243 Taxman 47/ 289 CTR 97/ 141 DTR 161 (SC)

  12. S.36(1)(ii) : Bonus or commission – Dispute settled and payment of bonus made to workers before due date – Deduction to be allowed  [S. 40A(9), 43B]

    Allowing the appeal the court held that; there was no dispute that the amount representing bonus was paid by the assessee to its employees within the stipulated time. The embargo specified under section 43B or section 40A(9) of the Act would not come in the way of the assessee. Therefore, the High Court was wrong in disallowing this expenditure as deduction while computing the business income of the assessee and the decision of the Tribunal was correct. (AYs. 1999-2000, 2001-02)

    Shasun Chemicals and Drugs Ltd v. CIT (2016) 388 ITR 1/ 243 Taxman 47/ 289 CTR 97 / 141 DTR 161 (SC)

  13. S.44AD : Civil construction – Computation – Depreciation – Income exceeding limit of
    &#8377 40 lakhs – Bar does not apply. [S. 32]

    On appeal against the decision of the High Court upholding the order of the Commissioner in revision affirming the order of the Assessing Officer calculating the assessee’s profit at a flat rate of 8 per cent on the gross receipts and disallowing depreciation claimed by the assessee : Held, that admittedly, the proviso to section 44AD of the Income-tax Act, 1961, was applicable to the assessee in view of the fact that its income for the assessment year in question, i.e., 2009-10, was above
    &#8377 40 lakhs and therefore, the bar to the entitlement for depreciation under section 44A(2) of the Act would not apply. Grant of depreciation under section 32 of the Act would, therefore, become mandatory. However, if on verification, it was found that the income of the assessee was less than
    &#8377 40 lakhs and, therefore, the proviso to section 44AD of the Act had application, the Department may seek modification of the Court’s order. (2009-10)

    Awasthi Traders v. CIT (2016) 388 ITR 185 (SC) (HC)

  14. S.45 : Capital gains – Share capital not to be treated as business income – Two units separately leased to directors – Not on par with other properties – Income therefrom to be treated as capital gains with deduction for cost. [S. 28(i)]

    Court held that; the amount of &#8377 45,84,000 on account of share capital received from the various shareholders ought not to have been treated as business income. Two units separately leased to directors is not on par with other properties. Income therefrom to be treated as capital gains with deduction for cost. (AY. 1996-97)

    G.S. Homes and Hotels P. Ltd. v. Dy. CIT (2016) 387 ITR 126/ 242 Taxman 58/ 289 CTR 105 (SC)

  15. S.50 : Capital gains – Depreciable assets – Block of assets – Restricted to mode of computation of gains, does not affect entitlement to exemption where asset held for more than thirty six months [Ss. 2(29B), 45, 48, 49, 54E]

    The assessee disclosed capital gains from sale of its loading platform in the year 1989 and claimed exemption under section 54E of the Income-tax Act, 1961 thereon. The asset had been purchased in the year 1972. The Assessing Officer rejected the claim to exemption under section 54E of the Act on the ground that the assessee had claimed depreciation on this asset and, therefore, the provisions of section 50 were applicable. This was upheld by the Commissioner (Appeals), but the Appellate Tribunal allowed the assessee’s appeal holding the assessee entitled to exemption under section 54E of the Act. The High Court, following its decision in CIT v. ACE Builders Pvt. Ltd. [2006] 281 ITR 210, affirmed the view of the Tribunal that the assessee was entitled to deduction under section 54E in respect of capital gains on which depreciation had been allowed and dismissed the Department’s appeal. On further appeal dismissing the appeal the court held that the view of the High Court was correct. Decision of the Panaji Bench of the Bombay High Court affirmed. (AY. 1989-90)

    CIT v. V.S. Dempo Company Ltd. (2016) 387 ITR 354/ 242 Taxman 434 (SC)

  16. S.55 : Capital gains – Cost of acquisition – Value as on 1-4-1974 – Tribunal was justified in adopting the value as on  1-4-1974 at higher value than the value shown in wealth tax return. [S. 45, 260A]

    AO and Commissioner (Appeals) determining value at &#8377 2 or 3 per sq. yard based on valuation filed by assessee for wealth-tax purposes .Tribunal determining value at
    &#8377 50 per sq. yard based on comparable sales. High Court reversed the finding of the Tribunal. Allowing the appeal, the Court held that a declaration in the return filed by the assessee under the Wealth-tax Act, 1957 would be a relevant fact for determination of the cost of acquisition which under section 55(2) is to be determined by a determination of the fair market value. Equally relevant for the purposes of the determination would be comparable sales though slightly subsequent in point of time for which appropriate adjustments could be made as had been made by the Tribunal (from
    &#8377 70 per sq-yard to &#8377 50 per sq-yard). Comparable sales, if otherwise genuine and proved, could not be shunted out from the process of consideration of relevant materials. They had been taken into account by the Tribunal which is the last fact finding authority under the Act. Unless such cognizance was palpably incorrect and, therefore, perverse, the High Court should not have interfered with the order of the Tribunal. That apart, the reference court under the Land Acquisition Act, 1894 had enhanced the compensation to
    &#8377 40 per sq-yard. This fact, though subsequent, would not be altogether irrelevant for the purposes of consideration of the entitlement of the assessee. In the facts of the present case the High Court ought not to have interfered with the order of the Tribunal. (AY 1989-90)

    Ashok Prapann Sharma v. CIT (2016) 389 ITR 462/ 290 CTR 481/ 76 taxmann.com 1 (SC)

  17. S.127 : Power to transfer cases – Transfer from one Assessing Officer to another under two different jurisdictions – Agreement between two jurisdictional Commissioners – Absence of disagreement not same as agreement – Positive state of mind required – The transfer of the income-tax assessment file of the assessee from Assessing Officer, Tamil Nadu to the Assessing Officer, Kerala was not justified

    Where the assessee’s case is transferred from one Assessing Officer to another and the two are not subordinate to the same Commissioner, under section 127(2)(a) of the Income-tax Act, 1961 an agreement between the Commissioners of the two jurisdictions is necessary. Section 127(2)(a) contemplates a positive state of mind of the two jurisdictional Commissioners. Held accordingly, that as the file of the assessee had been transferred from an Assessing Officer in Tamil Nadu to an Assessing Officer in Kerala and the two Assessing Officers were not subordinate to the same Director General or Chief Commissioner or Commissioner, under section 127(2)(a) of the Act, an agreement between the Director General, Chief Commissioner or Commissioner, as the case may be, of the two jurisdictions was necessary. The counter affidavit filed on behalf of the Department did not disclose that there was any such agreement. In fact, it had been consistently and repeatedly stated in the counter affidavit that there was no disagreement between the two Commissioners. Absence of disagreement was not tantamount to agreement as visualised under the section. The transfer of the income-tax assessment file of the assessee from Assessing Officer, Tamil Nadu to the Assessing Officer, Kerala was not justified or authorised under section 127(2)(a) of the Act and was to be set aside.

    Noorul Islam Educational Trust v . CIT (2016) 388 ITR 489/ 243 Taxman 519 (2017) 291 CTR 230 (SC)

  18. S.147 : Reassessment – A Writ Petition to challenge the issue of a reopening notice is maintainable – Order of High Court was set aside. [S. 148, Art. 226]

    Allowing the petition the Court held that ; The High Courts dismissed the writ petitions preferred by the assessee challenging the issuance of notice under Section 148 of the Income-tax Act, 1961 and the reasons which were recorded by the Assessing Officer for reopening the assessment. The writ petitions were dismissed by the High Courts as not maintainable. The aforesaid view taken is contrary to the law laid down by this Court in Calcutta Discount Limited Company v. Incom Tax Officer, Companies District I, Calcutta & Anr. [(1961) 41 ITR 191 (SC)]. We, thus, set aside the impugned judgments and remit the cases to the respective High Courts to decide the writ petitions on merits. We may make it clear that this Court has not made any observations on the merits of the cases, i.e. the contentions which are raised by the appellant challenging the move of the Income Tax Authorities to re-open the assessment. Each case shall be examined on its own merits keeping in view the scope of judicial review while entertaining such matters, as laid down by this Court in various judgments. We are conscious of the fact that the High Court has referred to the Judgment of this Court in CIT v. Chhabil Dass Agarwal (2013) 357 ITR 357 (SC)]. We find that the principle laid down in the said case does not apply to these cases.

    Jeans Knit Private Limited v. DCIT (2017) 390 ITR 10 / 244 Taxman 154 / 145 DTR 16/ 291 CTR 13 (SC)

  19. S.147 : Reassessment – Bad debt – Assessment reopened on ground no material to show debt written off as required under provision as amended with effect from 1-4-1989, notice was held to be valid [Ss. 36(1)(vii), 148]

    Allowing the appeal the Court held that; having regard to the fact that though the assessee has disclosed that the bad debts were transferred to K bank for realisation, the authority recording the reasons prior to issuance of notice under section 148 of the Act had specifically recorded that there was no material available on record to indicate that the bad debts had been written off as mandatorily required under section 36(1)(vii) of the Act as amended with effect from April 1, 1989. If that be so, no fault could be found with the notice issued. The Court has not expressed no opinion on merits. (AY. 2004-05)

    Dy. DIT v. Sumitomo Mitsui Banking Corporation (2016) 387 ITR 164/243 Taxman 514 /290 CTR 484 (SC)

  20. S.147 : Reassessment – Housing project – Failure to fully and truly disclose facts material to assessment – Information regarding actual size of plot used for construction available only in valuation report – Not full and true disclosure – Reassessment was held to be valid [S. 80-IB(10), 148]

    Dismissing the appeal the Court held that; in the communication dated February 10, 2003 addressed by the assessee to the Assessing Officer, only the value of the land was stated and in support, a certificate from the registered architect and engineer was filed. This information was supplied as there was some query about the value of the land. Obviously, while going to this document the Assessing Officer would examine the value of the land. However, the reason for issuing notice was that the assessee had not correctly disclosed the actual area of the plot and hence, it was not entitled to deduction under section 80-IB(10) of the Act. The Income-tax Officer had himself mentioned in the notice that such information was available only in the valuation report. The Assessing Officer was not expected to go through the information available in the valuation report for the purpose of ascertaining the actual construction of the plot. Therefore, the Department was right in reopening the assessment and the High Court had rightly dismissed the writ petition of the assessee challenging the validity of the notice. (AY. 2001-02)

    Girilal and Company v. ITO (2016) 387 ITR 122/ 243 Taxman 233/ 290 CTR 487 (SC)

  21. S.220 : Collection and recovery of tax – Special Court (Trial of Offences Relating to Transaction in Securities), matter was to be remanded back to Special Court to consider revenue’s objection that it had priority over said amount

    The Special Court (Trial of Offences relating to Transaction in Securities) directed disbursement of certain sum from the attached account without hearing the case of Revenue. Against such direction, Revenue preferred a review application which was dismissed by the Special Court without giving any reason or going through issue raised by Revenue. The Revenue contended that it had priority over such amounts which were directed to be disbursed. On Second Appeal, the SC opined that Special Court ought to have dealt with review application of Revenue on merits and decided the issue by giving detailed reason. Accordingly, the two orders of Special Court were set aside and the matter remitted back to pass fresh orders after hearing both the sides.

    ACIT v. Pallav Sheth (2016) 241 Taxman 13 (SC)

  22. S.226 : Collection and recovery – Modes of recovery – No bidder came forward to purchase said properties. Rule 17 would not impose any restriction on bank from participating in auction where there was no interested bidders. Auction sale in favour of bank would not be vitiated [Second Schedule, Rules 17, 59]

    The DRT directed the Recovery Officer to conduct a public auction. However, no bidders came forward to purchase the properties. Hence the bank itself offered to purchase the properties at
    &#8377 43.10 lakhs and &#8377 33.10 lakh. The bank’s offer was accepted and the said amount was deposited with Recovery Officer by the bank. The respondent moved the DRT against the aforesaid sale of mortgaged properties. DRT dismissed the application. On appeal, DRAT upheld the order passed by DRT. On appeal, High Court passed an order to set aside the orders of the DRT and DRAT and remanded the matter to the DRT. On appellant’s appeal to the Supreme Court: Rule 17 would not impose any restriction on bank from participating in auction where there were no interested bidders. Auction sale in favour of bank would not be vitiated. Accordingly , both the grounds relied upon by the High Court to come to the impugned conclusion not having been found to be acceptable, these appeals have to be allowed. And accordingly, set aside the order of the High Court and allow these appeals.

    ICICI Bank Ltd. v. Aburubam & Company (2016) 243 Taxman 72 (SC)

  23. S. 234B : Interest – Advance tax – Where receipt is by way of salary, TDS deduction u/s. 192 has to be made. No question of payment of advance tax can arise in cases of receipt by way of ‘salary’. Consequently, Ss. 234B & 234C which levy interest for deferment of advance tax have no application [Ss. 192, 234C]

    Allowing the appeal the Court held that; where receipt is by way of salary, TDS deductions u/s. 192 has to be made. Accordingly no question of payment of advance tax can arise in cases of receipt by way of ‘salary’. Consequently, Ss. 234B & 234C which levy interest for deferment of advance tax have no application .The appeals are allowed; the order of the High Court so far as the payment of interest under Section 234B
    and Section 234C of the Act is set aside. (AY. 1994-95)

    Ian Peter Morris v. ACIT (2016) 389 ITR 501/( 2017) 244 Taxman 219 / 145 DTR 13/ 291 CTR 15 (SC)

  24. S.246A : Appeal Commissioner (Appeals) – Appealable orders – Assessment treating assessee as resident – Dismissal of writ petition on ground of availability of remedy of appeal – Appeal – Supreme Court – High Court failing to consider Explanation to section 246 – Liberty to assessee to seek review – High Court to consider on merits. [S. 246, Constitution of India, Art. 136]

    Where, on a writ petition filed by the assessee challenging as without jurisdiction an assessment by the Income-tax Officer for the assessment year 2013-14 treating him as resident because he was a non-resident and could have been assessed only by the Commissioner (International Taxation), the High Court dismissed the writ petition on the ground that the assessee had an alternative remedy of filing an appeal under section 246(1)(a), on appeal : Held, that the High Court having omitted to take note of the Explanation under section 246, the assessee was to be granted liberty to approach the High Court by way of a review petition which the High Court shall consider on the merits.

    Petition under Article 136 of the Constitution for Special Leave to Appeal from the judgment and order dated May 9, 2016 of the Allahabad High Court. (AY. 2013-14)

    Abid Ali Khan v. ITO (2016) 389 ITR 82 (SC)

  25. S.260A : Appeal – High Court –Substantial question of law – Duty of High Court to frame – Substantial question of Law – Decision of appeal without doing so – Order set aside and matter remanded for consideration afresh

    Where the appeal under section 260A of the Income-tax Act, 1961 had been decided by the High Court without framing any substantial question of law : Held that the High Court ought to have framed the substantial questions of law arising in the appeal before answering them. The High Court having not done that, the order passed by it was liable to be set aside and the matter remanded to the High Court for consideration de novo after formulating the substantial questions of law arising, if any.

    Jai Hind Cycle Company Ltd v. CIT (2016) 388 ITR 482/ 243 Taxman 354/ (2017) 291 CTR 239 (SC)

  26. S.260A : Appeal – High Court – Review – Appeal of department was dismissed on ground of tax effect below limit set by Board – Affidavit of Department showing tax effect above limit – Request to High Court to consider review petition and if necessary appeal on merits. [S.268]

    Allowing the petition the Court held that where the High Court disposed of the Department’s appeal without entering into the merits on the ground that the tax demand which formed the subject matter of the appeal was less than
    &#8377 2 lakhs and dismissed the review petition filed by the Department as not maintainable against an order passed under the provisions of section 260A of the Income-tax Act, 1961, on appeal to the Supreme Court :

    The Department having filed an affidavit explaining how the notional tax effect was far beyond the amount of
    &#8377 2 lakhs, and the Court having taken a view that a review would be available of orders passed under section 260A of the Act, the Court, without expressing any opinion on the merits of the matter, allowed the appeals, set aside both the orders passed by the High Court and requested the High Court to decide the review petition and thereafter the appeal itself, if so required, on the merits.

    CIT v. Automobile Coro of Goa Ltd. (2016) 387 ITR 140/ 242 taxmann.com 101 (SC)

  27. S.260A : Appeal – High Court – Substantial question of law –Evasion of tax – Sale of flats below market rate – High Court ought to have framed question whether assessee had had recourse to colourable device to evade tax. [S.28(iv)]

    Where the High Court held that the Tribunal was justified in holding, based on the documents produced including the balance-sheet and the fact that the two entities to which flats were sold by the assessee had made payment in advance but the assessee had not explained the reason for selecting one for a deal at lower rate, that both sales were not genuine and that there had been an attempt to suppress the real income on which the tax had to be computed, and that therefore, no substantial question of law arose, on appeal to the Supreme Court :

    Held, the High Court should have framed the substantial question of law pertaining to the issue whether the assessee had had recourse to any kind of colourable device to evade the tax.

    Diamond Investment and Properties v. ITO (2016) 389 ITR 289 (SC)

  28. S.260A : Appeal – High Court – Deduction at source – Contractor – Opportunity of being heard –Assessee not heard by High Court – Review Petition dismissed by High Court – Appeal – Supreme Court – Orders set aside and matter remanded for decision afresh. [S. 194C]

    Held, allowing the appeal, that it was a fact that the assessee was not heard when the judgment was delivered. Even the review petition filed by the assessee was also rejected. In the circumstances, the judgment was to be set aside and the matters remitted to the High Court for hearing afresh. (AY. 1997-98)

    Novo Nordisk Pharma India Ltd v. CIT (2016) 389 ITR 134/( 2017) 244 Taxman 53/ 291 CTR 21 (SC)

  29. S.271(1)(c) : Penalty – Concealment – Omission by the AO to explicitly specify in the penalty notice as to whether penalty proceedings are being initiated for furnishing of inaccurate particulars or for concealment of income makes the penalty order liable for cancellation

    The Karnataka High Court had to consider the following question of law.

    “Whether, omission of Assessing Officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?”

    The High Court ruled in favour of the assessee with the following observations:

    “The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income-tax Act, 1961 (for short ‘the Act’) to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT v. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.”

    The department filed a Special Leave Petition to challenge the aforesaid judgment of the High Court. Held by the Supreme Court dismissing the SLP: (CC. No. 11485/2016, dt. 23.11.2015)

    “We do not find any merit in this petition. The special leave petition is, accordingly, dismissed.” (AY. 2009-10)

    CIT v. SSA’s Emerald Meadows (SC);
    www.itatonline.org

  30. S.254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Non consideration of paper book filed is a mistake apparent from the record, Tribunal was directed to hear the appeal of the assessee afresh on the basis of documents which have been already found to be filed by the assessee

    Allowing the petition the Court held that, non- consideration of paper book filed is a mistake apparent from the record, Tribunal was directed to hear the appeal of the assessee afresh on the basis of documents which have been already found to be filed by the assessee. (AY.1996-97)

    Nisha Synthetics Ltd v. CIT (2017) 145 DTR 345 (SC)

  31. S.277 : Offences and prosecutions – False statement – Verification – Search and seizure – Statement that assessees did not have any bank locker found to be untrue – Complaint filed by Deputy Director (Investigation) incompetent [Ss. 116, 132,Code of Criminal Procedure, 1973, S.195]

    The assessees had residences at Bhopal and Aurangabad and filed their returns of income at Bhopal. Search operations under section 132 of the Act were simultaneously conducted at both places on the strength of the warrant of authorisation under section 132 of the Act, issued, signed and sealed by the Director of Income-tax (Investigation), Bhopal. In the course of the interrogation of the assessees on whether they or any of them either individually or jointly held any locker, their answer was in the negative. Their statements were recorded by the Income-tax Officers. Further investigation revealed that they did hold a locker in a bank at Aurangabad. The office of the Deputy Director of Income-tax (Investigation), Bhopal issued a show cause notice to the assessees under section 277 of the Act alleging that they had made false statement under section 132(4) thereof, and seeking a reply why prosecution should not follow by virtue thereof. Pursuant to this, a complaint was filed by the Deputy Director of Income-tax (Investigation), Bhopal, in the court of the Chief Judicial Magistrate, Bhopal, asserting that by making such false statement in the course of search operations which were judicial proceedings in terms of section 136 of the Act, the assessees had committed offence under sections 109, 191, 193, 196, 200, 420, 120B and 34 of the Indian Penal Code, 1860. The Chief Judicial Magistrate issued process and on petitions before the High Court by the assessees seeking quashing of the proceedings on the ground that the search operations having been undertaken by the Income-tax Officers, the complaint could not have been lodged by the Deputy Director of Income-tax (Investigation) who was not the appellate authority in terms of section 195(4) of the 1973 Code and further no part of the alleged offence having been committed within the territorial limits of the court of the Chief Judicial Magistrate, Bhopal, the latter had no jurisdiction to either entertain the complaint or take cognizance of the accusations. The High Court upheld the jurisdiction of the Chief Judicial Magistrate and the competence of the Deputy Director (Investigation) to lodge the complaint. On further appeal :

    Held accordingly, that the Deputy Director of Income-tax (Investigation), Bhopal, was not an authority to whom appeal would ordinarily lie from the decisions/orders of Income-tax Officers involved in search proceedings so as to empower him to lodge the complaint in view of the restrictive preconditions imposed by section 195 of the 1973 Code. The complaint filed by the Deputy Director of Income-tax, (Investigation), Bhopal thus on an overall analysis of the facts of the case and the law involved was incompetent. The complaint was unsustainable in law having been filed by an authority, incompetent in terms of section 195 of the 1973 Code.

    Court also held that it could not be said that in the singular facts and circumstances, no part of the offence alleged had been committed within the jurisdictional limits of the Chief Judicial Magistrate, Bhopal. On a cumulative reading of sections 177, 178 and 179 of the 1973 Code in particular and the in-built flexibility discernible in the latter two provisions, in the attendant facts and circumstances of the case where a single and combined search operation had been undertaken simultaneously both at Bhopal and Aurangabad for the same purpose, the alleged offence could be tried by courts otherwise competent at both these places. To confine the jurisdiction within the territorial limits to the court at Aurangabad would amount to impermissible and illogical truncation of the ambit of sections 178 and 179 of the 1973 Code.

    From the decision of the Madhya Pradesh High Court

    Babita Lila v. UOI (2016) 387 ITR 305/288 CTR 489/ 243 Taxman 258 (SC) Interest-tax Act, 1974

  32. S.2(7) : Interest – Interest on debentures and upfront fees and interest on monies lent to other corporations – Levy is not attracted.

    Dismissing the appeal of revenue the Court held that interest on debentures and upfront fees and interest on monies lent to other corporations would not attract the provisions of the Interest-tax Act, 1974.

    CIT v. Gujarat Industrial Investment Corporation. (2016) 388 ITR 484/ 243 Taxman 218/ ( 2017) 291 CTR 17 (SC) (HC)

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