1. S. 4 : Charge of Income-tax – Capital or Revenue – Capital subsidy in terms of shareholders’ agreement from foreign company for investment in share capital of joint venture company — Capital receipt not liable to tax as Revenue receipt [S. 28(i)]

    Allowing the appeal of the assessee the Court held that capital subsidy in terms of shareholders’ agreement from foreign company for investment in share capital of joint venture company is capital receipt not liable to tax as Revenue receipt. (AY. 2002-03) (TCA. No 159 of 2009 dated 6-3-2019)

    Sundaram Finance Ltd. v. ACIT (2019) 413 ITR 298 (Mad.)(HC)

  2. S. 10(23C) : Educational institution – Receipt exceeded more than 1 crore – Purchase of land for further extension of school building – Eligible for exemption [S. 10(23C)(vi)]

    Assessee educational society filed application for grant of registration under section 10(23C)(vi). CIT(E) denied the exemption on ground that no evidence that assessee had utilised its income for educational purpose was adduced. Tribunal held that the assessee had utilised its income for purchase of land for further extension of school building, thus, assessee was held to be covered within provisions of section 10(23C)(vi) of the Act. On appeal High Court up held the order of Tribunal. (AY. 2012-13 to 2015-16)

    CIT (E) v. Managing Committee, Arya High School, Mausa, Punjab (2019)

    Editorial : SLP of revenue is dismissed, CIT (E) v. Managing Committee, Arya High School, Mausa, Punjab (2019) 261 Taxman 450 (SC)

  3. S. 10A : Free trade zone – Re computation of a claim already made is permissible- Language of S. 80A(5) does not restrict the correction or modification of claim before the AO. [S. 80A(5)]

    The assessee claimed exemption u/s. 10A in respect of its income earned from the business of providing outsourcing services. In the course of assessment proceedings, the assessee sought to revise the claim of exemption by making certain other allowances and disallowances. The AO refused to take cognizance of such claim on the ground that under section 80A(5), no new claims can be entertained, which were not made in the original return of income. Dismissing the appeal of the Revenue the Cout held that in the present case was that of recomputation of a claim already made. It was not a new claim at all. Therefore, the department ought to have taken cognizance of the same, especially considering the fact that it did not dispute the merits of such claim. (AY. 2009-10)

    PCIT v. Oracle (OFSS) BPO Services Ltd. (2019) 174 DTR 353/307 CTR 97/102 taxmann.com 396 (Delhi)(HC)

  4. S. 10B : Export oriented undertakings – Deemed exports – Export through third parties – Entitled to deduction

    Allowing the appeal of the assessee High Court held that, deemed export of goods through parties is entitle to deduction. Followed PCIT v. International Stones India (P) Ltd (2018) 95 taxmann.com 287 (Karn) (HC) (AY. 2008-09 to 2011-12)

    Metal Clousers (P.) Ltd v. Dy.CIT (2019) 102 taxmann.com 71 / 261 Taxman 162 (Karn) (HC)

    Editorial : SLP of revenue is dismissed Dy. CIT v. Metal Closures (P.) Ltd. (2019) 261 Taxman 161 (SC)

  5. S. 11 : Property held for charitable purposes – Application of income – Excess of expenditure of earlier years adjusted against income of relevant accounting year, amounts to application of income
    adjustment will have to be excluded from the income of the trust under section 11(1)(a) [S.11(1) (a), 12]

    Dismissing the appeal of the Revenue the Court held that excess of expenditure of earlier years adjusted against income of relevant accounting year, amounts to application of income. Accordingly adjustment will have to be excluded from the income of the trust under section 11(1)(a) (AY. 2011-12)

    CIT v. Chalassani Education Trust. (2019) 412 ITR 343 (Karn)(HC)

  6. S. 12AA : Procedure for registration – Trust or institution- Violation of S. 13 is not a ground for cancellation of registration. [S. 13]

    Where the assessee Trust had entered into a transaction with a person referred to in section 13 and therefore there was a violation of section 13(1), its effect was to be seen by the AO while carrying out the assessment. Such a violation was not a ground for cancellation of registration. The only grounds for cancellation of registration under section 12AA are where it is discovered that the activities of the Trust are not genuine or they are not being carried out in accordance with the objects of the Trust.

    PCIT v. Ashoka Education Foundation (2019) 174 DTR 377/262 Taxman 440 (Bom.)(HC)

  7. S. 12AA : Procedure for registration – Trust or institution – Society imparting training to various officers /officials involved in criminal justice – No profit motive – Entitle for registration. [S.2(15), 12A]

    Dismissing the appeal of the Revenue the Court held that assessee society was constituted by Government for imparting training to various officers / officials involved in criminal justice system with no profit motive at all and whatever funds were generated or received in aid, were utilised for aforesaid public purpose. Entitle for registration. (AY. 2010-11)

    CIT (E) v. Institute of Correctional Administration (2019)103 taxmann.com 84 (P&H)(HC)

    Editorial : SLP of revenue is dismissed, CIT (E) v. Institute of Correctional Administration (2019) 261

    Taxman 556 (SC)

  8. S. 14A : Disallowance of expenditure – Exempt income – Explanation offered cannot be rejected arbitrarily by the AO [R. 8D]

    Dismissing the appeal of the Revenue the Court held that, explanation of assessee and amount offered to tax under said section could not have been rejected by Assessing Officer in arbitrary manner.

    PCIT v. Hero Corporate Service Ltd. (2019) 103 taxmann.com. 199/ 262 Taxman 30 (Delhi) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Hero Corporate Service Ltd. (2019) 262 Taxman 29 (SC)

  9. S. 14A : Disallowance of expenditure – Exempt income – Not recorded the satisfaction for not accepting the disallowance – Deletion of addition is held to be justified [R.8D]

    Dismissing the appeal of the Revenue the Court held that the assessee has made suo motu disallowance, however the AO applied the Rule 8D(2) of the Act. Tribunal held that the AO has not recorded the satisfaction for not accepting the disallowance hence, deleted the addition. Order of Tribunal is affirmed by High Court. (ITA No. 237 of 2017, dt. 2-4-2019) (AY. 2009-10).

    PCIT v. Bajaj Finance Ltd. (Bom)(HC), www.itatonline.org 

  10. S. 14A : Disallowance of expenditure – Exempt income – Applicability of Rule 8D is not mandatory in every case where assessee earns tax free dividend income – Rule 8D cannot be invoked and applied unless Assessing Officer records his dissatisfaction regarding correctness of claim made by assessee in relation to expenditure incurred to earn exempt income [S.10(34), R.8D]

    The assessee had made self disallowance of certain expenditure in order to earn said income. AO without examining and referring to the disallowance or recording his dissatisfaction on disallowance made, invoked Rule 8D of 1962 Rules as if it was mandatory. CIT (A) and Tribunal deleted the addition. On appeal by the Revenue dismissing the appeal of the Revenue, Court held that unless Assessing Officer records his dissatisfaction regarding correctness of claim made by assessee in relation to expenditure incurred to earn exempt income Rule 8D cannot be invoked. This is the mandate and pre condition imposed by sub-section (2) to section 14A of the Act. Rule 8D is in the nature of best judgment determining, i.e., determination in default and on rejection of the explanation of the assessee in relation to expenditure incurred to earn exempt income. Rule 8D is not applicable by default but only if and when the Assessing Officer records his satisfaction and rejects the explanation of the assessee regarding the disallowance of expenditure. In the present case the assessment order proceeds on a wrong assumption that rule 8D would apply to all cases and is mandatory. Finding of the Tribunal affirming the order of the Commissioner (Appeals) is in accordance with the law. (AY. 2010-11).

    PCIT v. Vedanta Ltd. (2019) 261 Taxman 179 (Delhi)(HC)

  11. S. 14A : Disallowance of expenditure – Exempt income – Unless and until there is receipt of exempt income for concerned assessment year, section 14A is not attracted [R. 8D]

    Unless and until there is receipt of exempt income for concerned assessment year, section 14A is not attracted. Circular No 5/2014, dt. 11-2-2014 is considered.

    PCIT v. Vardhman Chemtech (P.) Ltd. (2019) 261 Taxman 233 (P&H)(HC)

  12. S. 14A : Disallowance of expenditure – Exempt income – When there is no exempt income shown during the year no disallowance can be made [R.8D]

    Dismissing the appeal of the Revenue, the High Court Held that when there is no exempt income shown during the year, no disallowance can be made. (AY. 2008-09)

    CIT v. DLF Home Developers Ltd. (2019) 411 ITR 378 (Delhi) (HC)

  13. S. 23 : Income from house property – Annual value – Standard rent – Illegal tenant – Deposit of certain compensation on monthly basis in Court, could not form basis to make addition to assessee’s rental income in respect of other tenants who are protected under Rent Control Act. [S. 22, Delhi Rent Control Act]

    Dismissing the appeal of the Revenue the Court held that deposit of certain compensation on monthly basis in Court in respect of one of the tenant who occupied the premises illegally, could not form basis to make addition to assessee’s rental income in respect of other tenants who are protected under Rent Control Act. (AYs. 2003-04 to 2006-07)

    PCIT v. Seth Properties. (2019) 262 Taxman 124 (Bom) (HC)

  14. S. 28(i) : Business income – Interest income – Interest on amount advanced to contractor assessable as business income and not as income from other sources. [S. 56]

    Dismissing the appeal of the Revenue the Court held that interest earned by assessee on sums lent to contractor constituted its business income and not as income from other sources. (AY. 2010-11, 2011-12).

    PCIT v. Nabinagar Power Generating Co. (P.) Ltd. (2019) 103 taxmann.com 225 / 262 Taxman 9 (Delhi) (HC)

    Editorial : SLP of revenue is dismissed, PCIT v. Nabinagar Power Generating Co. (P.) Ltd. (2019) 262 Taxman 8 (SC)

  15. S. 28(i) : Business loss – Revaluation of obsolete inventories – Valuation was supported by technical experts – Allowable as business loss [S. 145]

    Assessee reduced value of 313 obsolete items of its stocks and spares which were not used for past five years or more by 50 per cent, which was done on basis of recommendation of committee of experts appointed by the Board of the assessee company. The assessee claimed loss on account of such evaluation of obsolete inventory. The AO disallowed the loss, which was affirmed by the Tribunal. On appeal the Court held that technical evaluation was conducted on the basis of recommendation of the Committee hence the loss on revaluation is held to be allowable as business loss.

    Hindustan Newsprint Ltd v. ACIT (2019)262 Taxman 334 (Ker)(HC)

  16. S. 36(1)(iii) : Interest on borrowed capital – Investment in share capital of sister concern, with a view to earn dividend income – Expenditure incurred is held to be allowable as deduction

    Dismissing the appeal of the revenue the Court held that Tribunal found that assessee had made investment which would yield income in form of dividend and therefore, investment was made for purpose of earning income. Accordingly the expenditure incurred for earning such income had to be allowed. (AY. 2008-09)

    PCIT v. Premier Finance & Trading Co. Ltd. (2019) 262 Taxman 341 (Bom) (HC)

  17. S. 37(1) : Business expenditure – Completion contract method – Compensation paid to allottees of flat who refuse to take up the allotment due to change in Regulation of Municipal Corporation – Allowable as business expenditure – Interest and guarantee commission — Service Charges — Held to be deductible [S.145 ]

    Court held that the unsold flats that had been surrendered to the assessee were part of its stock-in-trade. In view of Accounting Standard 2, the compensation paid subsequent to the completion of the project was an “extraordinary item”. It was not “cost” of completion of the project and, therefore, such compensation could not be added to the value of the stock-in-trade of the assessee. Accounting Standard 2 governs valuation of inventories. “Cost” comprises all of the costs of purchase, costs of completion and other costs incurred “in bringing the inventories to their present location and condition”. That which was not relevant to bringing the stock to its present condition or location cannot be a part of its value. The mere fact that the space buyer’s agreement or the allotment letter did not mandate payment of compensation would not come in the way of the assessee treating such payment as “revenue expenditure”. The assessee had a plausible explanation for making such payment of compensation to protect its “business interests”. While it was true that there was no “contractual obligation” to make the payment, it was plain that the assessee was also looking to build its own reputation in the real estate market. Further the mere fact that the recipients treated the payment as capital gains in their hands in their returns would not be relevant in deciding the issue whether the payment by the assessee should be treated as “business expenditure”. The payment made by the assessee to the allottees of the flats for their surrendering the rights therein should be allowed as business expenditure of the assessee. That Accounting Standard 2 would apply to interest and guarantee commission and, with the assessee following the completed contract method, the expenditure incurred subsequent to the completion of the project could not be attributed to work and had to be allowed only as revenue expenditure. That the service charges were incurred after the completion of the project and would not be part of the capital work- in-progress. Having been incurred at a stage subsequent to the completion of the project it had to be shown as revenue expenditure and was rightly allowed as such by the Tribunal. (AY. 1995-96 to 2009-10)

    Gopal Das Estates and Housing Pvt. Ltd. v. CIT (2019) 412 ITR 489 (Delhi)(HC)

  18. S. 37(1) : Business expenditure – Capital or revenue – Preoperative expenditure – new line of business- Business abandoned subsequently – Allowable as revenue expenditure.

    Allowing the appeal of the assessee the Court held that the proper test to be applied was not the nature of the new line of business, which was commenced by the assessee, but unity of control, management and common fund. This issue was never disputed by the Assessing Officer or the appellate authorities. The authorities had concurrently held that it was the assessee who had commenced the business and the assessee would mean the assessee- company as a whole and not a different entity. Therefore, when there was commonality of control, management and fund, those would be the decisive factors to take into consideration and not the new line of business, namely, the textile business. Before the Commissioner (Appeals) a specific ground had been raised stating that the Assessing Officer ought to have appreciated that the decisive factors for allowance were unity of control, management, interconnection, interlacing, interdependent, common fund, etc., and if the above factors were fulfilled, then the expenditure should be allowed even if the project was a new one. The Commissioner (Appeals) did not give any finding on such a ground raised by the assessee. Therefore, it was incorrect on the part of the Department to contend that such a question was never raised before the appellate authorities (AY. 2000-01).

    Chemplast Sanmar Ltd. v. ACIT (2019) 412 ITR 323 (Mad.)(HC)

  19. S. 37(1) : Business expenditure- Employee Stock option Plan (ESOP) – Expenditure incurred on allotment of shares under Employee Stock option Plan (ESOP) is held to be allowable as business expenditure

    Dismissing the appeal of the Revenue the Court held that expenditure incurred on allotment of shares under Employee Stock option Plan (ESOP) is held to be allowable as business expenditure (AY. 2008-09).

    PCIT v. Lemon Tree Hotels (P.) Ltd. (2019)104 taxmann.com 26/ 262 Taxman 312 (Delhi) (HC)

    Editorial: SLP is granted to the revenue, PCIT v. Lemon Tree Hotels (P.) Ltd. (2019) 262 Taxman 311 (SC)

  20. S. 37(1) : Business expenditure on-compete fee paid by assessee to founder of transferor company constituted business expenditure

    Dismissing the appeal of the Revenue the Court held that Non-compete fee paid by assessee to founder of transferor company constituted business expenditure. (AY. 2001-02 )

    ITO v. Smartchem Technologies Ltd. (2019) 103 taxmann.com 359 /262 Taxman 192 (Guj.) (HC)

    Editorial: SLP of revenue is allowed, ITO v. Smartchem Technologies Ltd. (2019) 262 Taxman 191 (SC)

  21. S. 37(1) : Business expenditure – Foreign travelling expenditure of trustee on tourist visa – Held to be allowable

    Dismissing the appeal of the Revenue the Court held that the trustee had gone to various countries to expand business of trust and mere fact that he went on tourist visa could not be a ground to conclude that no business was transacted. Deletion of addition is held to be justified. (AY. 2005-06)

    CIT v. Swadeshi Internationals (2019) 261 Taxman 430 (Karn.)(HC)

  22. S. 37(1) : Business expenditure – Consultancy charges – Statement – Retraction – Merely on the basis of statement recorded in the course of search, which was retracted – No disallowance can be made without bringing on record independent material [S.132(4)]

    Dismissing the appeal of the Revenue the Court held that merely on the basis of statement recorded in the course of search, which was retracted, with in a short time by filing an affidavit. Subsequently his further statement was recorded he reiterated the stand taken in affidavit. Court held that no disallowance of consultancy charges can be made without bringing on record independent material.

    CIT v. Reliance Industries Ltd. (2019) 261 Taxman 358 (Bom.)(HC).

  23. S. 37(1) : Business expenditure – Illegal Commission- Volcker Committee Report – No finding that the assessee had made payment – Deletion of addition held to be justified

    Assessee claimed deduction towards payment for purchase of oil. Revenue claimed that assessee had paid illegal commission to State Oil Marketing Organization, an Iraqi government agency for purchase of oil; therefore, such expenditure was not allowable. However, Commissioner (Appeals) observed that except for Volcker Committee Report there was no evidence that assessee had paid any such illegal commission, that even in said report, there was no finding that assessee had made illegal payments and that payments were made by an agent. Tribunal confirmed view of Commissioner (Appeals) Dismissing the appeal of the Revenue the Court held that since entire issue was based on appreciation of evidence, no question of law arose for consideration from Tribunal’s order allowing payment for purchase of oil (AY. 2002-03) (ITA No. 5769/M/2013 dt. 16-9-2015)

    CIT-LTU v. Reliance Industries Ltd. (2019) 261 Taxman 283 (Bom.)(HC)

  24. S. 37(1) : Business expenditureCapital or revenue – Copyright expenses – Only licence to use copyright – Allowable as revenue expenditure

    Dismissing the appeal of the Revenue the Court held that the assessee had only one license to use copyright –Allowable as revenue expenditure. (AY. 2012-13 )

    PCIT v. Mobisoft Telesolutions Pvt. Ltd. (2019) 411 ITR 609 (P&H)(HC)

  25. S. 40(a)(ia): Amounts not deductible – Deduction at source – Payment gateway charges paid to a bank for swiping credit cards are in the nature of fees for banking services and not “commission” or “brokerage” – Not liable to deduct tax at source – No disallowances can be made [S.194H, 195(3)]

    Dismissing the appeal of the Revenue the Court held that payment gateway charges paid to a bank for swiping credit cards are in the nature of fees for banking services and not “commission” or “brokerage”. Accordingly, no TDS is deductible from the said charges u/s. 194H and no disallowance u/s. 40(a)(ia) can be made (CIT v. JDS Apparels (P) Ltd (2015) 370 ITR 454 (Delhi)(HC) followed) (ITA 136/2019, dt. 25-3-2019) (AY. 2009-10)

    PCIT v. Make My Trip India Pvt. Ltd. (Delhi)(HC), www.itatonline.org

  26. S. 40(a)(ia) : Amounts not deductible – Deduction at source – Payee filed the return and offered the sum received from the assessee – Second proviso to section 40(a)(ia) has retrospective effect from 1-4-2010 – No disallowances can be made [S. 194J, 201]

    Dismissing the appeal of the Revenue the Court held that where assessee made payments and deducted tax at source but failed to deposit such tax deducted at source to government account within due date of filing return for relevant years, since assessee had filed documents in evidence to show that payee had filed return and offered sum received from assessee to tax, impugned disallowance made under section 40(a)(ia) was to be deleted. (AY. 2011-12)

    CIT v. Bhanot Construction & Housing Ltd. (2019) 261 Taxman 262 (Delhi)(HC)

  27. S.40(a)(ia) : Amounts not deductible – Deduction at source – Recipients of the interest income had included the income in their return and paid taxes thereon – No disallowance can be made – Second proviso inserted by Finance Act 2012 has retrospective effect [S. 201(1)]

    Dismissing the appeal of the Revenue the Court held that the Tribunal is right in holding that recipients of the interest income had included the income in their return and paid taxes thereon. No disallowance can be made. Second proviso inserted by Finance Act 2012 has retrospective effect. (AY. 2012-13 )

    PCIT v. Mobisoft Telesolutions Pvt. Ltd. (2019) 411 ITR 607 (P&H)(HC)

  28. S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Timber business – Discontinuation of business for more than 10 years – Showing the creditors – Application of common sense principles – Burden of proof on assessee to show subsistence of liability – Liable to be taxed as profits of business

    Dismissing the appeal of the assessee the Court held that lapse of ten years of time, coupled with fact that there was a change of business altogether by assessee, and fact that debts had become time barred and no creditor made any claim for recovery from assessee during any of these years, even up to now. Assessing authority is justified in the amount as cessation of liability. When a trading liability ceased de facto and de jure and whether or not such trading liability could be said to have ceased in law so as to apply section 41(1) depended upon the facts and circumstances of each case. (AY. 2003-04)

    West Asia Exports & Imports (P.) Ltd. v. ACIT (2019) 412 ITR 208 / 262 Taxman 372 (Mad.)(HC)

  29. S. 43D : Public financial institutions – Method of accounting – Accrual of income – Real income theory – Interest on NPAs – Even though the special provision in S. 43D for taxing interest income on NPAs on receipt basis does not apply to NBFCs, it does not mean that NBFCs have to offer interest on bad or doubtful debts to tax on accrual basis. Such interest is not taxable on the real income theory [S.145]

    Dismissing the appeal of the Revenue the Court held that even though the special provision in S. 43D for taxing interest income on NPAs on receipt basis does not apply to NBFCs, it does not mean that NBFCs have to offer interest on bad or doubtful debts to tax on accrual basis. Such interest is not taxable on the real income theory. (ITA No. 237 of 2017, dt. 2-4-2019) (AY. 2009-10)

    PCIT v. Bajaj Finance Ltd. (Bom)(HC), www.itatonline.org 

  30. S. 44BB : Mineral oils – Presumptive tax – Reimbursement of custom duty, service tax paid earlier would not form part of the aggregate amount and not includible in gross receipts [S.2(24), 5, 9, 43B]

    Dismissing the appeal of the Revenue the Court held that the amount reimbursed to the assessee (service provider) by ONGC (service recipient), representing service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in clauses (a) and (b) of sub-section(2) of Section 44BB of the Act (DIT v. Mitchell Drilling International Pvt. Ltd. (2016) 380 ITR 130 (Delhi) (HC) CBDT Circular No. 4/2008 dt. 28-4-2008 (2008) 300 ITR 92 (St) & Circular No. 1/2014 dt 13-1-2014 (2014) 360 ITR 53 (St) is followed). Accordingly the appeals are to be listed before the Division Bench, hearing appeals under Section 260-A of the Act, for its disposal in terms of this order. (ITA No. 40 of 2012. Dt. 12-4-2019) (AY. 2004 05)

    DIT (IT) v. Schlumberger Asia Services Ltd. (2019)104 taxmann.com 353 / 177 DTR 126 (FB)) (Uttarakhand)(HC), www.itatonline.org

  31. S.45 : Capital gains – Transfer – Joint Development agreement (JDA) – In the absence of registration, agreement did not fall under S.53A of the Transfer of Property Act – Not liable to capital gains tax [S.2(47)(v) Transfer of Property Act, 1882 S. 53A]

    Dismissing the appeal of the Revenue the Court held that in absence of registration of joint development agreement, agreement did not fall under section 53A of Transfer of Property Act, 1882 and, consequently, section 2(47)(v) did not apply. Accordingly not liable to capital gains tax. (AY. 2007-08)

    P CIT v. Chuni Lal Bhagat (2019) 103 taxmnn.com 378 /262 Taxman 210 (P&H) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Chuni Lal Bhagat. (2019) 262 Taxman 209 (SC)

  32. S.45 : Capital gains – Penny Stocks – What is intriguing that the company had meagre resources and reported consistent losses. The astronomical growth of the value of company’s shares naturally excited the suspicions of the Revenue – The company was even directed to be delisted from the stock exchange – The assessee’s argument that he was denied the right to cross-examine the individuals whose statements led to the inquiry and ultimate disallowance of the long term capital gains claim is not relevant in the wake of findings of fact- [S.68, 260A]

    The assessee acquired shares at ₹ 12 per share and within 19 months sold at ₹ 720 per share and reported capital gain of ₹ 13,33.956. All authorities held that when the company suffered heavy losses how there could be astronomical growth in value of the shares and the company was directed to be delisted from the stock exchange. Accordingly exemption from capital gain was denied. Appeal by the assessee it was contended that he was denied the right to cross-examination of the two individuals whose statements led to the inquiry and ultimate disallowance of the long term capital gain. Dismissing the appeal the Court held that AO CIT(A) and the ITAT have all consistently rendered adverse findings. Court also observed that,what is intriguing is that the company (M/s Kappac Pharma Ltd.) had meagre resources and in fact reported consistent losses. In these circumstances, the astronomical growth of the value of company’s shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Having regard to these circumstances and principally on the ground that the findings are entirely of fact, this court held that no substantial question of law arises. (ITA 220/2019 & CM No. 10774/2019, dt. 8-3-2019) (AY. 2014-15)

    Udit Kalra v. ITO (2019) 16 DTR 249/ 308 CTR 50 (Delhi)(HC), www.itatonline.org

  33. S. 45(4) : Capital gains – Distribution of capital asset – Retirement of partner – Amount received by a partner on her retirement from a partnership firm is not liable to capital gains tax [S.45]

    Dismissing the appeal of the Revenue the Court held that amount received by a partner on her retirement from a partnership firm was not liable to capital gains tax. (AY. 2006-07)

    Hemlata S. Shetty (Smt.) v. ACIT (2019) 262 Taxman 324 (Bom) (HC)

  34. S. 45(4) : Capital gains – Distribution of capital asset – Retirement of partner – If new partners come into the partnership and bring cash by way of capital contribution and the retiring partners take cash and retire, the retiring partners are not relinquishing their interest in the immovable property. What they relinquish is their share in the partnership – As there is no transfer of a capital asset, no capital gains or profit can arise [S.45]

    Dismissing the appeal of the Revenue the Court held that if new partners come into the partnership and bring cash by way of capital contribution and the retiring partners take cash and retire, the retiring partners are not relinquishing their interest in the immovable property. What they relinquish is their share in the partnership. As there is no transfer of a capital asset, no capital gains or profit can arise. (CIT v. A. N. Naik (2004) 265 ITR 346 (Bom) (HC) distinguished, Dynamic Enterprises (2013) 359 ITR 83 (FB) (Karn) (HC) followed). (ITA No. 137 of 2017, dt. 26-3-2019) (AY. 2010-11)

    PCIT v. Electroplast Engineers (Bom)(HC), www.itatonline.org

  35. S. 50C : Capital gains – Full value of consideration- stamp valuation – Without hearing objections of assessee, that Fair Market Value of capital asset as per ‘Guidance Value’ cannot be determined by authorities – Matter remanded to the Assessing Officer [S.45. 48]

    Allowing the appeal of the assessee the Court held that provision of section 50C only enables revenue to adopt Guidance Value declared by State for payment of stamp duty as Fair Market Value under section 48, but that Guidance Value cannot, ipso facto, be taken as valuation for purpose of computing Capital Gains Tax liability in hands of assessee/ seller. S.50C(2) itself provides for reference to Departmental Valuation Officer (DVO) if assessee objects to invoking of section 50C (1). However an assessee cannot be denied an opportunity to raise his objections even against presumptive Fair Market Value under section 50C(1) or report of DVO under section 50C(2) and Assessing Authority or Appellate Authorities, whose powers are co-extensive with those of Assessing Authority, cannot refuse to meet those objections point by point. Accordingly the matter was remanded to the Assessing Officer to pass the order after considering the objections of the assessee. (AY. 2012-13)

    Jagannathan Sailaja Chitta v. ITO (2019) 262 Taxman 427 (Mad.) (HC)

  36. S. 50C : In the return of income, the asses – Stamp valuation – Entire consideration was invested in bonds – The assessee cannot avoid the impact of S. 50C by claiming that his S. 54EC investment is large enough to cover the deemed consideration based on stamp duty valuation – Such interpretation renders S. 50C redundant [S.45, 48. 54EC]

    The assessee declared capital gains of ₹ 21,19,344 and claimed exemption u/s 54EC of the Act. The stamp authorises valued the share of the appellant at ₹ 76,17,702. AO determined the capital gains at ₹ 49,47,344. The assessee contended that entire sale consideration of ₹ 25 lakhs was invested in specified bonds and deeming provision of S.50C is not applicable. CIT (A) allowed the appeal. Tribunal affirmed the view of the AO. On appeal the High Court held that the assessee cannot avoid the impact of S. 50C by claiming that his S. 54EC investment is large enough to cover the deemed consideration based on stamp duty valuation. Such interpretation renders S. 50C redundant. Order of Tribunal is affirmed. (AY. 2008-09) (ITA No. 981 of 2016, dt. 12-3-2019)

    Jagdish C. Dhabalia v. ITO (2019) 176 DTR 417 / 308 CTR 295 (Bom)(HC), www.itatonline.org

    Mehul Jagdish Dhabalia v. ITO (2019) 176 DTR 417 / 308 CTR 295 (Bom) (HC). www.itatonline.org

  37. S. 54F : Capital gains – Capital asset – Investment in a residential house – Booked a flat in January 1981 – Right in the flat was sold in the year 2005 – Allowable deduction [S.2(14), 45]

    AO rejected assessee’s claim on ground that assessee had sold a flat which was in nature of residential unit and therefore, S. 54F would

    not apply. Tribunal held that the assessee had booked a flat far back in January, 1981 and till time, she sold her rights in flat in year 2005, completion of construction was nowhere in sight. Tribunal thus taking a view that it was not a case of sale of residential property, allowed assessee’s claim for deduction. High Court affirmed the order of the Tribunal. (AY. 2006-07)

    CIT v. Kalpana Hansraj (2019) 261 Taxman 294 (Bom.)(HC)

  38. S.68 : Cash credits – Shares at a premium – Genuineness, creditworthiness and identity of investors are established –Addition cannot be made as cash credit

    Dismissing the appeal of the Revenue the Court held that when genuineness, creditworthiness and identity of investors are established- Addition cannot be made as cash credit on ground that shares were issued at excess premium. (AYs. 2012-13, 2013-14)

    PCIT v. Chain House International (P.) Ltd. (2018) 98 taxmann.com 47 (2019) 307 CTR 19 (MP) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Chain House International (P.) Ltd. (2019) 262 Taxman 207 (SC)

  39. S. 68: Cash credits – Bogus Share Capital – Merely because the investment was considerably large and several corporate structures were either created or came into play in routing the investment in the assessee through a Mauritius entity would not be sufficient to brand the transaction as colourable device – The assessee cannot be asked to prove the source of source

    Dismissing the appeal of the Revenue the Court held that merely because the investment was considerably large and several corporate structures were either created or came into play in routing the investment in the assessee through a Mauritius entity would not be sufficient to brand the transaction as colourable device. The assessee cannot be asked to prove the source of source. (PCIT v. NRA Iron & Steel (2019) 103 Taxmann.com 48 (SC) is referred) (ITA No. 1502 of 2016, dt. 26-3-2019)

    PCIT v. Aditya Birla Telecom Ltd. (Bom.)(HC), www.itatonline.org

  40. S. 69C : Unexplained expenditure – Bogus purchases – Trader in fabrics – Entire purchases cannot be added without disturbing the sales – Addition is to be restricted to the extent of G. P. rate [S.145]

    Dismissing the appeal of the Revenue the Court held that even if the purchases are bogus, the entire purchase amount cannot be added. As the department had not disputed the assessee’s sales & there was no discrepancy between the purchases and the sales, the purchases cannot be rejected without disturbing the sales in case of a trader. The addition has to be restricted to the extent of the G.P. rate on purchases at the same rate of other genuine purchases (N. K. Industries Ltd v. Dy. CIT (2016) 72 taxmann.com 289/(2017) 292 CTR 354 (Guj.), (HC) N. K. Proteins v. Dy. CIT (2017) 250 Taxman 22 (SC) referred.(ITA 1004 of 2016, dt. 11-2-2019)

    PCIT v. Mohommad Haji Adam (Bom)(HC), www.itatonline.org

  41. S. 69C : Unexplained expenditure – Bogus purchases – Sundry creditors – Only profit element embedded in credits can be taxed Restricted to 25% of element of profit [S.37, 69A]

    The AO added outstanding credits in the name of various alleged bogus purchases.

    The CIT (A) restricted the additions to the profit element of 25 per cent. Both the assessee and the Department filed appeals before the Tribunal both of which were rejected. Dismissing the appeal of the revenue High Court upheld the order of the Tribunal. (Referred N. K Proteins Ltd. SLP No. (C) 769 of 2017, Vijay Proteins Ltd v. CIT (2018) 409 ITR 3 (St)(SC), N. K. Industries Ltd v. Dy. CIT (2016) 72 taxmann.com 289 (Guj.) (HC))

    CIT v. Nandkishor Huaschand Jalan. (2019) 412 ITR 357 (Guj)(HC)

  42. S. 74 : Losses – Capital gains – Carry forward – Loss determined in pursuance of a return filed for earlier assessment year u/s. 139 can only be carried forward [S.139]

Petitioner filed an application before Authority for Advance Rulings (AAR) seeking answer as to whether it was entitled to carry forward accumulated capital losses, in terms of section 74 of the Act. AAR held that petitioner was not entitled to carry forward accumulated losses because they were not ‘assessee’ who had claimed a loss in earlier assessment year by filing return of income. Aggrieved by the order of the AAR the petitioner filed the writ petition. Dismissing the petition the Court held that before a carry forward loss can be claimed by assessee, it is necessary that a loss has been determined in pursuance of a return filed for earlier assessment year under section 139. As the petitioner had not filed any return of income claiming loss for earlier assessment year, order passed by AAR is affirmed. (Referred K. V. K. Raju v. CIT (2001) 252 ITR 754 (AP) (HC)

Aberdeen Institutional Commingled Funds LLC. v. AAR. (2019) 262 Taxman 346 (Bom) (HC)

  1. S. 80-I : Industrial undertakings – Deduction under section 80-I should be given on profit without reducing deduction under section 80HH. [S.80HH]

    Dismissing the appeal of the Revenue the Court held that deduction under section 80-I should be given on profit without reducing deduction under section 80HH. (AY. 1994-95)

    CIT v. Hindustan Lever Ltd. (2019)103 taxmann. com 88 (Bom.) (HC)

    Editorial: SLP of revenue is dismissed; CIT v. Hindustan Lever Ltd. (2019) 261 Taxman 547 (SC)

  2. S. 80IA :Industrial undertakings – Infrastructure development
    – Where the assessee had sold many units, it was entitled to deduction under S. 80-IA even if the Authority’s approval came later on [S.80IA(4)(iii)]

    Where the assessee had sold 21 units located in the Industrial Park and those units were also operational, it was entitled to the deduction under section 80IA(4) which is available to the assessees who begin to develop, operate and maintain industrial parks. The date of certificate from the local authority is not to be taken as the date of commencement. Followed Ganesh Housing Corporation Ltd v. Under Secretary (2011) 399 ITR 441 (Guj) (HC). Appeal of revenue is dismissed. (A.Y. 2007-08)

    PCIT v. Kolte Patil Developers Ltd. (2019) 175 DTR 280/ 307 CTR 704 (Bom.)(HC)

  3. S. 80-IA : Industrial undertakings – Infrastructure development – Captive power – Valuation of electricity provided to another unit should be at rate at which electricity distribution companies were allowed to supply electricity to consumers.

    Dismissing the appeal of the Revenue the Court held that for computing deduction profits arising from captive consumption of electricity, valuation of electricity provided to another unit should be at rate at which electricity distribution companies were allowed to supply electricity to consumers.

    CIT v. Reliance Industries Ltd. (2019) 261 Taxman 358 (Bom.)(HC)

  4. S.92C : Transfer pricing – Arm’s length price – Comparable – Merger and Amalgamation had taken place in a company
    – Cannot be selected for comparable – Securities and stock broker cannot be compared with merchant banker – Interest earned on margin money deposited with AE for broking services for futures and options should be factored in to determine ALP

    Dismissing the appeal of the Revenue the Court held that while determining the Arm’s length price, Merger and Amalgamation had taken place in a company cannot be selected for comparable. Securities and stock broker cannot be compared with merchant banker. Interest earned on margin money deposited with AE for broking services for futures and options should be factored in to determine ALP. (AY. 2006-07)

    PCIT v. J. P. Morgan India (P) Ltd (2019) 261 Taxman 404 (Bom) (HC)

  5. S. 92CA Reference to transfer pricing officer – Transfer Pricing – Jurisdiction of Transfer Pricing Officer – In specified domestic transactions Transfer Pricing Officer has no jurisdiction unless specific reference is made to him by Assessing Officer – High Court can consider issue of jurisdiction though alternative remedy is available. [S. 40A (3A), 92BA(i) 92C, 92E, Art.226] Art. 226]

    Allowing the petition the Court held that in specified domestic transactions Transfer Pricing Officer has no jurisdiction unless specific reference is made to him by Assessing Officer. Accordingly the order of the Transfer Pricing Officer was quashed in so far as it recommended an adjustment of the arm’s length price towards payment of creditors in the demerger process of a sum of ₹ 57.54 crore. Court also held that it can consider issue of jurisdiction though alternative remedy is available. However in respect of the adjustment made by the Transfer Pricing Officer towards payment of subscription fees, even though the assessee may have certain arguable points, that by itself, would not enable the High Court to bypass the entire statutory scheme of assessment, appeal and revision. The order dealing with the balance after deducting ₹ 57.54 crore would not be interfered with. (AY. 2015-16) (WP. No 3386 of 2018 dt. 15-3-2019 )

    Times Global Broadcasting Company Ltd. v. UOI (2019) 413 ITR 42 (Bom) (HC)

  6. S. 115JB : Book profit – Banking – Insurance – Electricity company – Are not company bound by provisions of Companies Act – (Pre-amendment by Finance Act, 2012) – Provision is not applicable to a banking company, insurance & electricity cos- The mechanism provided for computing book profit in terms of S. 115JB(2) is wholly unworkable for a banking company- When the machinery provision fails, the charging section also fails – Provision is not applicable – The anomaly was removed by the Finance Act, 2012 – However, the amendments are neither declaratory nor clarificatory but make substantive and significant legislative changes which are applicable prospectively

    Dismissing the appeal of the Revenue the Court held that Banking, Insurance and Electricity companies are not companies bound by provisions of Companies Act. (Pre amendment by Finance Act, 2012) Provision is not applicable to a banking company (also insurance & electricity cos). The mechanism provided for computing book profit in terms of S. 115JB(2) is wholly unworkable for a banking company. When the machinery provision fails, the charging section also fails- The anomaly was removed by the Finance Act, 2012 – However, the amendments are neither declaratory nor clarificatory but make substantive and significant legislative changes which are applicable prospectively.(Followed Kerala State Electricity Board v. Dy CIT (20110) 329 ITR 91 (Ker)(HC)). (ITA No. 1196 of 2013 and 1175 of 2013, dt. 16-4-2019)

    CIT v. Union Bank of India (Bom)(HC).
    www.itatonline.org

  7. S. 115JB : Book profit – While computing book profit, provision made for payment of wealth tax could not be included in it as section 115JB only refers to income-tax paid or payable or provisions made therefor – No question of law. [S.260A]

    Section 115JB pertains to special provision for payment of tax by certain companies. As is well known, detailed provisions have been made to compute the book profit of the assessee for the purpose of the said provision. Explanation 1 contains list of amounts to be added while computing assessee’s book profit under section 115JB. In plain terms, clause (a) as noted above refers to amount of income-tax paid or payable or the provision made therefor. The legislature has advisedly not included wealth tax in this clause. By no interpretative process, the wealth tax can be included in clause (a). Clause (c) would include the amount set aside for provisions made for meeting liabilities other than ascertained liabilities. For applicability of this clause, therefore, fundamental facts would have to be brought on record which in the present case, the revenue has not done. In fact, the entire thrust of the revenue’s argument at the outset appears to be on clause (a) which refers to the income- tax which according to the revenue would also include wealth tax. This question, therefore, is not required to be entertained. (AY. 2002-03) (ITA No. 5769/M/2013 dt 16-9-2015)

    CIT-LTU v. Reliance Industries Ltd. (2019) 261 Taxman 283 (Bom.)(HC)

  8. S.145 : Method of accounting Construction business – Percentage completion method Brokerage expenditure – Allowable in the year when the expenditure is incurred [S.37(1)]

    Dismissing the appeal of the Revenue the Court held that when the assessee follows percentage completion method, brokerage expenditure is allowable in the year when the expenditure is incurred. (AY. 2008-09)

    CIT v. DLF Home Developers Ltd. (2019) 411 ITR 378 (Delhi) (HC)

  9. S.145 : Method of accounting – Mercantile system – Legal steps taken for enhancement of rent – Rent claimed before the arbitrator should be shown as accruing when the matter is pending before the Arbitration [S.22, 23]

    When the assessee has taken legal steps to recover the enhancement of rent. Rent claimed before the arbitrator should be shown as accruing when the matter is pending before the Arbitration. There cannot be protective assessment of income relating to one year in another assessment year. (AYs. 1985-86, 1996-97 to 2002-03 )

    CIT v. Punalur Paper Mills Ltd. (2019)411 ITR 563 (Ker)(HC)

  10. S. 147 : Reassessment – After the expiry of four years – Outstanding creditors for more than 10 years – Capital gains – Where the assessee had made the due disclosure, assessment could not be reopened after four years from the end of the Assessment year [S. 41(1), 45, 115-O]

    A notice for reopening of assessment was issued beyond a period of our years from the end of the relevant assessment year on three grounds. With respect to the first ground of cessation of liability, the assessee had transferred the outstanding interest in inter-branch accounts to the P&L Account. Since all the relevant details with respect to this issue were already filed in the course of original assessment, there was no failure on the part of the assessee to disclose truly and fully all material facts. With respect to the second ground, the assessee had in the original return of income offered a capital gains of ₹ 4.68 crore to tax, which was erroneously written as ₹ 44.68 crore in the assessment order. The assessee filed a rectification application before the AO which was accepted and the mistake rectified. In the reopening notice, the AO has contradicted himself by saying that the correct amount of capital gain was not offered to tax. Reopening cannot be sustained on this ground either. In the third ground, the AO argued that in calculating dividend distribution tax, the assessee was allowed to deduct only the dividend received from the subsidiaries in the given financial year. With respect to this ground too, the assessee had truly and fully disclosed all the relevant facts in the original assessment proceedings. The reopening was therefore to be quashed. (Referred Dr. Amin’s Pathology Laboratory (2001) 252 ITR 673 (Bom.) (HC) Raymond Woollen Mills Ltd. v. ITO (1999) 236 ITR 34 (SC) (WP No. 3588 of 2018 dt. 17-1-2019) (AY. 2011-12)

    State Bank of India v. ACIT (2019) 175 DTR 335/103 taxmann.com 164 (Bom.)(HC)

  11. S. 147 : Reassessment – With in four years – Where the AO had questioned the assessee with respect to a particular income but not dealt with it in the order, reopening on the ground of taxability of the same income would amount to a change of opinion [S.148]

    In the course of assessment proceedings, the AO had questioned the assessee regarding the taxability of certain interest income. In its reply, the assessee gave details of such income and also answered as to why such income was not taxable. Assessment was sought to be reopened on the ground that the interest income was liable to tax. Held that once the AO had in the course of the original assessment questioned the assessee regarding the taxability of a particular income and not brought the same to tax, reopening to tax the same income would amount to a change of opinion. It is irrelevant that in the assessment order, the AO had not dealt with this aspect in detail. (AY. 2013-14).

    Rubix Trading (P) Ltd. v. ITO (2019) 174 DTR 1(Bom.)(HC)

  12. S. 147 : Reassessment – Failure to disclose material facts – If the AO had the information during the assessment proceeding, irrespective of the source, but chooses not to utilise it, he cannot allege that the assessee failed to disclose truly and fully all material facts & reopen the assessment [S.148]

    Allowing the petition the Court held that; the fact that the assessee did not disclose the material is not relevant if the AO was otherwise aware of it. If the AO had the information during the assessment proceeding, irrespective of the source, but chooses not to utilize it, he cannot allege that the assessee failed to disclose truly and fully all material facts & reopen the assessment. (WP No. 3546 of 2018, dt. 5-4-2019) (AY. 2011-12)

    Rajbhushan Omprakash Dixit v. DCIT (Bom.) (HC) www.itatonline.org

  13. S. 147 : Reassessment – Notice – Non-disposal of objection by observing that it was not feasible to pass separate speaking order in respect of objections raised – It is mandatory to decide objections one way or other – Not curable defects
    – Non-adjudication of objections after receiving same, would render consequential actions and orders illegal. [S. 144, 148]

    AO issued notice under S. 148 – Assessee filed objections. After receipt of objections, drastically on next day, revenue passed impugned order of assessment. Reason for not considering objections was that it was not feasible to pass separate speaking order in respect of objections raised. On writ allowing the petition the Court held that it is mandatory to decide objections one way or other, it cannot be said that non-decision thereof would be curable. Non-adjudication of objections after receiving same, would render consequential actions and orders illegal. (AY. 2006-07, 2007-08)

    Raninder Singh v. CIT (2019) 261 Taxman 214 (P&H)(HC)

  14. S. 148 : Reassessment – Notice to dead person – Assessment order is held to be invalid [S.147]

    Allowing the petition the Court held that as per settled law, notice for reopening of assessment against a dead person is invalid. The fact that the AO was not informed of the death before issue of notice is irrelevant. Consequently, the S. 148 notice is set aside and order of assessment stands annulled. Followed Alamelu Veerappan v. ITO (2018) 257 Taxman 72 (Mad) (HC) followed). (WP No. 404 of 2019, dt. 5-4-2019) (AY. 2007-08)

    Rupa Shyamsundar Dhumatkar v. ACIT (Bom)(HC), www.itatonline.org

  15. S.148 : Reassessement – Recorded reasons not communicated – Produced before the Tribunal – Reassessment is bad in law [S.147]

    Dismissing the appeal of the Revenue the Court held that Tribunal is justified in quashing the reassessment order on ground that reasons recorded by assessing authority for reopening were never communicated to assessee though same were produced before Tribunal. (AY. 2009-10)

    PCIT v. Ramaiah (2019) 103 taxmann.com 201 / 262 Taxman17 (Karn.) (HC)

    Editorial : SLP of revenue is dismissed. PCIT v. Ramaiah (2019) 262 Taxman 16 (SC)

  16. S.148: Reassessment – Notice in the name of deceased assessee – For acquiring jurisdiction to reopen an assessment, notice should be issued in name of living person, i.e., legal heir of deceased assessee – S292B could not be invoked to correct a fundamental/substantial error – Notice is held to be bad in law. [S.147, 292B, 292BB]

    The petitioner, who is the legal heir challenged the issue of notice on the ground that it was without jurisdiction on the ground that it was issued in the name of deceased assessee. Allowing the petition the court held that, the issue of a notice under section 148 is a foundation for reopening of assessment. The sine qua non for acquiring jurisdiction to reopen an assessment is that such notice should be issued in the name of the correct person. This requirement of issuing notice to a correct person and not to a dead person is not merely a procedural requirement but is a condition precedent to the impugned notice being valid in law. Accordingly a notice which has been issued in the name of the dead person is also not protected either by provisions of section 292B or section 292BB. Therefore, both the impugned notice dated 29-3-2018 and the order dated 13- 11-2018 was quashed and set aside. (AY. 2011-12)

    Sumit Balkrishna Gupta. v. ACIT (2019) 262 Taxman 61 (Bom)(HC)

  17. S. 148 : Reassessment – Notice – Notice against dead person – Merely because in response to notice issued against Jayantilal Harilal Patel petitioner had informed Assessing Officer about death of assessee and asked him to drop proceedings – it could not, by any stretch of imagination, be construed as petitioner having participated in proceedings and, therefore, provisions of section 292B would not be attracted – Notice is held to be invalid. [S. 2(7)/ 2(29), 159, 147 292B]

    Original assessee, namely Jayantilal Harilal Patel died on 24-6-2015. AO issued a notice under section 148 in name of Jayantilal Harilal Patel to reopen assessment. Petitioner being heir and legal representative of Jayantilal Harilal Patel informed AO that Jayantilal Harilal Patel had already expired and, therefore, notice in his name was not valid. He also enclosed death certificate. AO disposed of objections raised by petitioner stating that since original assessee’s son-legal heir had received notice and replied to it, he had participated in proceedings and, thus, defect in issue of notice was automatically cured as per provisions of section 292B. Accordingly, Assessing Officer continued with reassessment proceedings against Jayantilal Harilal Patel. On writ allowing the petition the Court held that merely because in response to notice issued against Jayantilal Harilal Patel petitioner had informed Assessing Officer about death of assessee and asked him to drop proceedings, it could not, by any stretch of imagination, be construed as petitioner having participated in proceedings and, therefore, provisions of section 292B would not be attracted. Accordingly the issued under section 148 was to be treated as invalid. (AY. 2011-12)

    Chandreshbhai Jayantibhai Patel v. ITO (2019) 261 Taxman 137 (Guj.)(HC)

  18. S. 147 : Reassessment – Bogus share capital – Though the reopening is based on information supplied by the investigation wing, the reasons do not specify that the investment was non- genuine – The AO cannot reopen to investigate into the source of genuineness and creditworthiness of the investors as it falls within the realm of fishing enquiries which is wholly impermissible in law [S.68, 148]

    Allowing the petition the Court held that the reasons only refer to a simple piece of information supplied to the Assessing Officer by the Investigation Wing, stating that the assessee company had received share application money of ₹ 49.99 Crores from First land. To reiterate, this information is nothing which the Assessing Officer did not have at his command when the Assessment was framed. The reasons do not specify that the information supplied to the Assessing Officer by the Investigation Wing, suggested that such investment was no genuine. In this context, Assessing Officer refers to the requirement of verifying the genuineness of investor and requirement of further investigation. These observations in para 3 of the reasons, would not further the case of the Revenue, these being no information with the Assessing Officer, prima facie, indicating that the investments were not genuine. The investigation into the source of genuineness and creditworthiness of the investor company would fall within the realm of fishing enquiries, which is wholly impermissible in law in the context of the reopening of the assessment. For such reasons, impugned notice is set aside. Petition is allowed.(WP No. 3618 of 2018. dt. 7-3-2019).

    Nu Power Renewable Pvt. Ltd. v. ACIT (Bom)(HC), www.itatonline.org

  19. S. 153C : Assessment – Income of any other person – Search – A satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the Assessing Officer who has jurisdiction over such other person – Not furnishing the reasons for satisfaction – Proceedings is held to be invalid

    Allowing the petition the Court held that, a satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the Assessing Officer who has jurisdiction over such other person. the note would disclose that it was only a note prepared for initiating proceedings under section 153C. It neither had any heading or title, to indicate that it was a satisfaction recorded nor did the contents suggest the satisfaction of the Assessing Officer. Hence, the note was incomplete. This aspect went to the root of the matter. Hence proceedings initiated under section 153C of the Act were without jurisdiction and were vitiated in law. (AY. 2008-09)

    SVK Minerals. v. DCIT (2019) 411 ITR 709 (Karn) (HC)

    Shyamraj Singh v. DCIT (2019) 411 ITR 709 (Karn) (HC)

  20. S. 194C : Deduction at source – Contractors – Annual Maintenance Contract in respect of various specialised hospital equipments – Not be in nature of fees for technical services – Deduction of tax at source as contractor – Held to be proper [S.194J]

    Dismissing the appeal of the Revenue the Court held that Annual Maintenance Contract in respect of various specialised hospital equipments is not be in nature of fees for technical services hence deduction of tax at source as contractor is held to be proper. (Followed CIT v. Grant Medical Foundation (2015) 375 ITR 49 (Bom) (HC)

    CIT v. Asian Heart Institute and Research Centre (P.) Ltd. (2019) 262 Taxman 395 (Bom)(HC)

  21. S. 220 : Collection and recovery – Assessee deemed in default – Stay – Non-speaking order – Directing to pay 20 per cent of demand during pendency of appeal is set aside

    Assessee’s application for interim stay of recovery of demand was disposed of with a conditional order to pay 20 per cent of tax demand made by Assessing Officer relying wholly on CBDT instruction No. 1914, dated 21-3-1996. PCIT also confirmed said order without even hearing assessee. Allowing the petition the Court held that, since no speaking order was passed by revenue authorities while directing assessee to deposit 20 per cent of demand amount and impugned order was passed relying wholly on CBDT instruction no. 1914, dated 21-3-1996, impugned order being mechanical and passed without application of mind was to be set aside and matter was to be remanded back for disposal afresh.

    Shriram Finance. v. PCIT (2019) 262 Taxman 220 (Mad) (HC)

  22. S. 226 : Collection and recovery – Assessee deemed in default – Stay – Strictures – Recovery proceedings were stayed – Revenue was directed to re deposit the amount withdrawn from the Bank – Order set aside – Court also expressed dismay at the conduct of the Officers of the Revenue – The desire to collect more revenue cannot be at the expense of Rule of law – Revenue to pay cost of ₹ 50,000 to the Petitioner for the unnecessary harassment [S. 10(23FB), 10(35), 220(6), 226(3), 245, 281B]

    The petitioner is a trust established under Indian Trust Act 1882 and granted a certificate of registration by the SEB as venture capital Fund and the petitioner is entitle exemption u/s. 10 (23FB) of the Act. Earlier years the Appellate Tribunal decided the issue in favour of the assessee and the assessee is entitle to huge amount of refunds. When the stay application was pending vefore the CIT, The AO passed provisional attachment u/s. 281B of the Act, attached the Bank Accounts u/s. 226(3) of the Act and also adjusted the refunds u/s. 245 of the Act. On writ the Court held that Revenue authorities should apply the law equally to all and not be over zealous in seeking to collect revenue ignoring the statutory provisions as well as binding decisions. The petitioner is being singled out for unfair treatment. Accordingly recovery proceedings were stayed. Revenue was directed to re deposit the amount with drawn from the Bank. Order set aside. Court also observed as under “we have to express our dismay at the conduct of the Officers of the Revenue in this matter. We pride ourselves as a State which believes in rule of law. Therefore, the least that is expected of the Officers of the State is to apply the law equally to all and not be over zealous in seeking to collect the revenue ignoring the statutory provisions as well as the binding decisions of this Court.” Revenue was also directed to pay cost of ₹ 50,000 to the Petitioner for the unnecessary harassment. (WP No. 543 of 2019, dt. 26-3-2019) (AY. 2016-17)

    Milestone Real Estate Funds v. ACIT (Bom) (HC), www.itatonline.org

  23. S. 226: Collection and recovery – Assessee deemed in default – Stay – Rejection of stay application by a single line order stating petition rejected – Order set aside and directed the tax authorities to pass speaking order [S.220]

    AO passed an order of assessment under section 143(3). Against said order, assessee preferred an appeal before Commissioner (Appeals). Assessee also filed a stay petition before Assessing Officer seeking to stay recovery of disputed tax demand till disposal of appeal before Commissioner (Appeals). AO however passed an order calling upon assessee to pay 15 per cent of tax demand. Thus, assessee preferred an application before Revenue seeking for stay of demand of entire disputed tax. Revenue rejected said application by a single line order stating ‘Petition rejected, Assessing Officer to collect eligible demand’. On writ the Court held that since order of assessment did not reach its finality, assessee was entitled to file stay petition before Appellate Authority and canvas all points in support of their stay petition, therefore, in view of fact that revenue rejected assessee’s application by a single line order, without stating any reason or finding as to why application was liable to be rejected, impugned order was to be set aside with a direction to revenue to decide assessee’s application on merit and in accordance with law. (AY. 2012-13)

    Archit Khemka v. PCIT (2019) 261 Taxman 108 (Mad.)(HC)

  24. S. 226 : Collection and recovery Stay of demand – The CBDT’s Circulars & Instructions are in the nature of guidelines & cannot substitute or override the basic tenets – The AO is required to assist a taxpayer in every reasonable way – Even if the assessee has not specifically invoked the three parameters for grant of stay, it is incumbent upon the AO to do so & pass a speaking order [S.220(3), 220(6)]

    The Court held that the ‘trinity’ of prima facie case, financial stringency & balance of convenience are basic tenets which are indispensable in consideration of a stay petition. The CBDT’s Circulars & Instructions are in the nature of guidelines & cannot substitute or override the basic tenets. The AO is required to assist a taxpayer in every reasonable way. Even if the assessee has not specifically invoked the three parameters for grant of stay, it is incumbent upon the AO to do so & pass a speaking order (WP. No. 3849 of 2019 and 4278 of 2019, dt. 13-2-2019) (AY. 2018- 19 )

    Kannammal (Mrs.) v. ITO (Mad)(HC), www.itatonline.org

    Jayanthi Seeman v. PCIT (Mad)(HC), www.itatonline.org

  25. S. 234B : Interest – Advance tax – Sub-section (2A) to section 234B introduced by the Finance Act, 2015 is not retrospective and would be applicable to all proceedings in which orders are pending and/or in which orders under section 245D(4) are passed on or after 1-6-2015. [S. 234B (2A), 245D(4)]

    The Settlement Commission under section 245D(4) settled the case and had directed for levy of interest on the enhanced amount under sub-section (2A) to section 234B. The assessee filed the petition and contended that sub-section (2A) to section 234B introduced by the Finance Act, 2015 is not retrospective and would not be applicable as the petitioner had filed the application for settlement before sub-section (2A) to section 234B was enacted and Sub- section (2A) to section 234 B was inserted by the Finance Act, 2015 with effect from 1-6-2015. Dismissing the petition the Court held that, Sub- section (2A) to section 234B introduced by the Finance Act, 2015 is not retrospective and would be applicable to all proceedings in which orders are pending and/or in which orders under section 245D(4) are passed on or after 1-6-2015.

    Orchid Infrastructure Developers (P.) Ltd. v. UOI (2019) 261 Taxman 389 (Delhi)(HC)

  26. S. 244A : Refunds – Interest on refunds – Refund of excess tax collected was withheld and refunded by department after a huge delay merely on ground of pendency of appeal filed by Revenue – Entitled to interest however not entitle to interest on interest [S.243, 244]

    Assessee’s claim for refund of excess tax collected was withheld and refunded by department after a huge delay merely on ground of pendency of appeal filed by Revenue. On writ the Court held that, since there was no stay granted by Appellate Authorities, assessee would be entitled to compensation by way of interest for such delay but assessee would not be entitled to interest on interest which was awarded as compensation. (AY. 2002 -03)

    Nirma Specific Family Trust. v. ACIT (2018) 100 taxmann.com 262 (Guj) (HC)

    Editorial: SLP of assessee for interest on interest is dismissed, Nirma Specific Family Trust. v. ACIT (2019) 262 Taxman 304 (SC)

  27. S. 250 : Appeal – Commissioner (Appeals) – Guidelines for disposal of appeals – Incentive to CIT(A) – Target of disposal
    – Enhancement and penalty – Impermissible and invalid – Portion of Central Action Plan prepared by CBDT which gives higher weightage for disposal of appeals by quality orders i.e., where order passed by Commissioner (Appeals) is in favour of Revenue was to be set aside [S.119]

    Allowing the petition the Court held that the CBDT is empowered to lay down broad guidelines for disposal of appeals by CIT(A). However, it cannot offer ‘incentives’ to CIT(A) for making enhancement and levying penalty. Such policy transgresses the exercise of quasi-judicial powers & is wholly impermissible and invalid u/s. 119. The ‘Incentives’ have the propensity to influence the CIT(A) and they will be tempted to pass an order in a particular manner so as to achieve a greater target of disposal. Portion of Central Action Plan prepared by CBDT which gives higher weightage for disposal of appeals by quality orders i.e. where order passed by Commissioner (Appeals) is in favour of revenue was to be set aside. (WP No. 3343 of 2018, dt. 11-4-2019)

    Chamber of Tax Consultants v. CBDT (2019) 104 taxmnn.com 397 (Bom)(HC), www.itatonline.org

  28. S. 253 : Appellate Tribunal – Territorial jurisdiction – Assessee situated at Moga within jurisdiction of Amritsar Bench – Order passed by Appellate Tribunal at Chandigarh without territorial jurisdiction – Order is null and void – Matter to be sent to Amritsar Bench for disposal [S.254(1)]

    The assessee-society filed an appeal before the Chandigarh Bench of the Tribunal against the order of the Commissioner (E) rejecting grant of registration under section 12AA of the Income-tax Act, 1961. The Tribunal directed the Commissioner (E) to grant registration and registration was granted. At that point of time, it was found that since the assessee was situated at Moga and the territorial jurisdiction was that of the Amritsar Bench of the Tribunal instead of the Chandigarh Bench. The Department filed an application stating that the order passed by the Chandigarh Bench Tribunal was without jurisdiction as the case falls within the territorial jurisdiction of Amritsar Bench. The application was dismissed. On appeal the Court held that if the Tribunal lacked territorial jurisdiction, the order passed was a nullity being without jurisdiction. The decision being right or wrong would not affect the jurisdiction of the Tribunal. The orders passed by the Chandigarh Bench of the Tribunal was set aside and the matter was sent to the Amritsar Bench of the Tribunal to decide the appeal afresh. (AY. 2009-10)

    CIT v. Baba Amarnath Educational Society (2019) 412 ITR 234 (P&H)

  29. S. 254(1) : Appellate Tribunal – Duties – Non-speaking orders – The CIT(A) allowed the claim of expenditure and depreciation after verification of merits – Tribunal was not right in law in reversing the said conclusion without examination – Mater reminded – Liberty is granted to the assessee to bring the issue of reassessment after disposal of appeal by the Appellate Tribunal [S.260A]

    Allowing the appeal of the assessee the Court held that when the CIT(A) allowed the claim of expenditure and depreciation after verification of merits the Tribunal was not right in in law reversing the said conclusion without examination – Mater reminded. Liberty is granted to the assessee to bring the issue of reassessment after disposal of appeal by the Appellate Tribunal. (AY. 2006 -07)

    Shirpur Gold Refinery Ltd v Dy.CIT (2019) 262 Taxman 390 (Bom) (HC)

  30. S. 254 (1): Appellate Tribunal – Power – Ex-parte order – Tribunal has statutory power to recall its order if it is satisfied that respondent has failed to appear before it for sufficient cause at time of hearing and to restore appeal [ITAT R. 25]

    Allowing the appeal the Court held that the Appellate Tribunal has statutory power to recall its order if it is satisfied that respondent has failed to appear before it for sufficient cause at time of hearing and to restore appeal. It cannot be said that Tribunal has no authority of law to consider application of assessee for recall of an order by which appeal was decided ex parte. (AY. 2005-06 and 2011-12)

    Dr. Gopal Dass Agarwal v. CIT (2019) 261 Taxman 158 (All.)(HC)

  31. S. 254(1) : Appellate Tribunal- Powers – Payments prohibited by law – Reinsurance payments to non-Residents is not prohibited by law — The Tribunal has no power to exceed an order of remand by the High Court- Tribunal must decide issues raised in appeal — Tribunal has no power to declare Transaction illegal under different statute Matter remanded to decide in accordance with law [S.37(1), 40(a)(i), Insurance Act, 1938, S. 2(16B), 101A, 114A]

    The Tribunal has no power to exceed an order of remand by the High Court. Tribunal must decide issues raised in appeal. Tribunal has no power to declare Transaction illegal under different statute. Reinsurance payments to non-Residents is not prohibited by law. Matter remanded to decide accordance with law. The Tribunal had no jurisdiction to declare any provisions of the regulations to be inconsistent with the provisions of the Insurance Act. This was wholly outside the purview of the Tribunal. The Tribunal did not consider the correctness of the order passed by the Assessing Officer or that of the Commissioner (Appeals). Therefore, the Tribunal could not have held that the Assessing Officer rightly disallowed the reinsurance premium under section 40(a)(i). This finding was not supported with any reasons. (AY. 2009-10)

    Note: Order in Dy. CIT v. Cholamandalam Ms. General Insurance Co. Ltd. (2018) 12 ITR (Trib)- OL 540 (Chennai) (Trib) is set aside and matter remanded.

    Cholamandalam Ms. General Insurance Co. Ltd. v. DCIT (2019) 411 ITR 386 (Mad.) (HC)

  32. S. 254(2A): Appellate Tribunal – Stay- Appeal could not be decided by Tribunal due to pressure of pendency of cases and delay in disposal of appeal was not attributable to assessee in any manner-Interim protection of stay could continue beyond 365 days [S. 254(1)]

    Dismissing the petition of the Revenue the Court held that wherever appeal could not be decided by Tribunal due to pressure of pendency of cases and delay in disposal of appeal was not attributable to assessee in any manner, interim protection of stay could continue beyond 365 days. (AY. 2011-12)

    PCIT v. Comverse Network Systems India (P.) Ltd. (2019) 103 taxmann.com 313/ 262 Taxman 100 (P&H) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Comverse Network Systems India (P.) Ltd. (2019) 262 Taxman 99 (SC)

  33. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Assessment after detailed enquiry – Income from house property – Income from other sources – Notice of revision is not valid [S. 143(3)]

    The Assessing Officer after scrutiny passed the order of assessment accepting the assessee’s declaration of rental income as well as computation of income from other sources. The Commissioner issued a notice of revision on the grounds that the rental income was too low and there had been excess deduction of expenses. On a writ petition to quash the notice. Court held that, the opinion that the rental income was low was based on comparison. The comparison was wholly erroneous. Firstly, the Commissioner merely proceeded to record that both the immovable properties, namely, the mall managed by the assessee-company and one managed by G, were situated in the nearby locality, without giving the distance between the two properties and without even prima facie ascertaining their respective locations. The Commissioner also merely adopted the respective municipal taxes of the two properties as the basis for considering commercial rental value of these properties. Regarding the expenditure the Assessing Officer had carried out detailed inquiry during the course of assessment proceedings. Merely because the Commissioner held a different belief that would not permit him to take the order in revision. Clearly a case of full inquiry had been made by the Assessing Officer before he made up his mind.

    This was not a case where there were no inquiries or no germane inquiries having been made. The notice of revision was not valid. (AY. 2013-14)

    Aryan Arcade Ltd. v. CIT (2019) 412 ITR 277 (Guj.) (HC)

  34. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Doctrine of merger – Where 80-IC deduction was originally denied by the AO on one ground which was subject matter of CIT(A) and the disallowance was deleted by CIT(A) – CIT could not invoke revision jurisdiction to deny the deduction on another ground. [S.80IC]

    In the return of income, the assessee claimed deduction u/s. 80-IC in respect of income from oil wells by describing itself as a mineral based industry. The deduction was denied by the AO on the ground that each well did not constitute a separate ‘undertaking’. The order of the AO was reversed by the CIT(A) and deduction was granted. Subsequently, the assessment order was sought to be revised by the Commissioner on the ground that the AO had not examined whether the assessee was a mineral based industry or not. Held that so far as the issue of deduction u/s. 80-IC was concerned, the order of the AO had merged with the order of the CIT(A) in terms of clause (c) of Explanation 1 to S. 263(1) as the AO and the CIT(A) had already adjudicated on the eligibility of the assessee to such deduction. The AO had proceeded on the basis of the information that the assessee was a mineral based industry. Furthermore, since the AO had already denied the deduction, there was no financial prejudice to the Revenue. Therefore, the proceedings u/s. 263 were wrongly initiated. (AY. 2005-06, 2006-07)

    Oil India Ltd. v. P CIT (2019) 175 DTR 185/ 307 CTR 403 /103 taxmann.com 339 (Gau.)(HC)

  35. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Bogus purchases and depreciation – Revision is held to be not valid [S.32, 69C]

Dismissing the appeal of the Revenue the court held that the Tribunal has given finding that the assessee has produced copies of invoices and challans, proof of payments, bank statements, transportation payments, vouchers for movement of goods etc, accordingly revision was held to be not valid.

CIT v. Century Plyboards (I) Ltd. (2019) 103 taxmann.com 178 / 262 Taxman 14 (Cal.) (HC)

Editorial: SLP of revenue is dismissed, CIT v. Century Plyboards (I) Ltd. (2019) 262 Taxman 13 (SC)

  1. S. 271(1)(c) : Penalty – Concealment – Depreciation – Voluntary withdrawal of claim during course of assessment proceedings – Does not mean that assessee accepted guilt or giving wrong or false explanation – Levy of penalty is not justified [S.32]

Allowing the appeal the Court held that giving up the claim of depreciation under section 32 would not automatically entail penalty under section 271(1)(c). The imposition of penalty was neither automatic nor was expected to be imposed even if the bona fide explanation of the assessee was not accepted by the statutory authorities. There was no concealment on the part of the assessee. The purchase of the three pay loaders in question on the last day of the previous year was supported by the production of purchase invoices before the assessing authority. Even if the assessee was confused during the course of the assessment proceedings about the place of delivery, whether at T or P, it could not be said that the assessee’s statement was false because there was no rebuttal of the fact that the pay loaders were available ready for use at Chennai port before the last day was over on March 31, 2000. The assessee produced the relevant evidence before the assessing authority as well as the Commissioner (Appeals). For reasons best known to the assessee he gave up the claim for depreciation but that did not mean that the assessee admitted the guilt of giving a wrong explanation or a false explanation or having concealed his income or filing inaccurate particulars. There was absence of mens rea or guilty animus on the part of the assessee. No material brought on record by the assessing authority indicated or proved guilty animus on the part of the assessee. The order of the Tribunal restoring the penalty imposed by the Assessing Officer was set aside. (AY. 2000-01)

B. Loganathan. (2019) v. ITO 412 ITR 642 (Mad)(HC)

  1. S. 271(1)(c) : Penalty – concealment – capital gain exemption claimed – Quantum addition is confirmed – Full disclosure was made – No mala fide intention – Deletion of penalty is held to be justified

Dismissing the appeal of the Revenue the Court held that though quantum additions were confirmed up to stage of Tribunal. The assessee had made full disclosures were made by assessee and issue was not free from doubt and on the basis of legal advice.

PCIT v. Samir Suryakant Sheth. (2019) 103

taxmann.com 197 / 262 Taxman 28 (Guj) (HC)

Editorial: SLP of revenue is dismissed, PCIT v. Samir Suryakant Sheth. (2019) 262 Taxman 27 (SC)

  1. S. 271(1)(c) : Penalty – Concealment – Debatable issue
    Merely because the addition is confirmed levy of penalty is not justified – Deletion of penalty on the sole ground that the High Court has admitted the Appeal and framed substantial questions of law, it cannot be said that the entire issue is debatable one and under no circumstances, penalty could be imposed.

Dispute between the assessee and the Department is with regard to payment of purchase of flat whether deduction u/s. 54F is available. The assessee had made bona fide claim. Neither any income nor any particulars of income were concealed. The Tribunal deleted the penalty on the sole ground that quantum appeal is admitted by the High Court. Dismissing the appeal of the revenue the Court held that merely because the addition is confirmed levy of penalty is not justified. relied on CIT v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC). Court also observed that Merely because the High Court has admitted the Appeal and framed substantial questions of law, it cannot be said that the entire issue is debatable one and under no circumstances, penalty could be imposed. Referred, CIT v. Dharamshi B. Shah (2014) 366 ITR 140 (Guj.)

(HC)) (ITA No. 169 of 2017, dt. 19-3-2019) (AY. 2006-07)

PCIT v. Rasiklal M. Parikh (Bom)(HC), www.itatonline.org

  1. S. 271AAA : Penalty – Search initiated on or after 1st June, 2007 – Manner of earning the undisclosed income to be given in the statement under 132(4) only if a question is asked to that effect-Deletion of penalty is held to be justified [S. 132(4)]

    As per sub-section (2) of section 271AAA, no penalty is leviable under sub-section (1) if the assessee in his statement recorded under section 132(4) admits the undisclosed income, specifies the manner in which such income has been earned and satisfies certain other conditions. Held that where the assessee had admitted the undisclosed income but not specified the manner in which such income was earned in his statement under section 132(4), penalty under the section was still not leviable since the Officer had not asked a question requiring the assessee to specify the manner in which such income was earned. Appeal of Revenue is dismissed.

    PCIT v. Phoenix Mills Ltd. (2019) 175 DTR 433/307 CTR 700 (Bom.)(HC)

  2. S. 271C : Penalty – Failure to deduct tax at source – Pendency of appeal before Appellate Tribunal – Revenue authorities should be restrained from passing any order imposing penalty [S.201, 206AA]

    On account of assessee’s failure to deduct tax at source, AO raised demand under S. 201 and during pendency of appellate proceedings, he initiated penalty proceedings under S. 271C of the Act. On writ the Court has directed that so long as appeal was pending before Tribunal, revenue authorities should be restrained from passing any order imposing penalty on assessee under sections 271C and 206AA of the Act. (AY. 2018-19)

    Uber India Systems (P.) Ltd. v. JCIT (2019) 262 Taxman 133 (Bom)(HC)

  3. S. 271C : Penalty – Failure to deduct at source – Delay in paying whole or part of tax deducted at source – Reasonable cause – Penalty can be waived or reduced – Interpretation – When there is ambiguity interpretation in favour of assessee is to be adopted [S.194C, 276C(1), 273B]

    Question before the Full Bench was whether for delay in paying whole or part of tax deducted at source, penalty can be waived or reduced. Court held that S. 271C (1) of the Income- tax Act, 1961 deals with penalty in cases of deduction of tax at source. Under the first clause, i. e., clause (a), penalty is for failure to deduct tax at source, as required by or under the provisions of Chapter XVII-B and under no other circumstances. Under the second clause, i.e., clause (b), penalty is for failure to pay the whole or any part of the tax, as further clarified by the words which follow the said stipulation, i.e., “as required by or under, (i) sub-section (2) of section 115-O; or (ii) second proviso to section 194B.” Except for the failure with respect to the above two instances, no other instance is mentioned under clause (b) to attract payment of penalty.

    Section 115-O is part of Chapter XII-D and it does not come within the purview of any deduction under Chapter XVII-B envisaged under clause (a) of section 271C(1). Section 194B, on the other hand, definitely comes under Chapter XVII-B. The Chapter contains various instances of deduction of tax at source. In so far as the law makers have taken a conscious decision to identify only section 194B of Chapter XVII-B of the Act (leaving the payment of tax deducted in respect of other instances in the very same Chapter) to be liable to penalty, the instances covered by clause (a) of section 271C(1) cannot be read into clause (b) of section 271C(1). In other words, it is not for the court to rewrite the law or question the legislative wisdom of the law makers in this regard. However, a doubt may arise as to whether there was any intent on the part of the law makers to let the defaulters go scot free, if penalty cannot be levied upon them for non-payment even after deduction of tax, which is a more serious lapse than the failure to deduct tax. The situation has been taken care of by Parliament, in section 276B of the Act, providing for prosecution in specific circumstances. Even in a case where there is some delay in effecting payment of tax, if proper and sufficient reasons are shown for the delay involved, the mitigating circumstances can very well be considered by the competent authority, who can waive the penalty (wherever penalty can be legally imposed) or reduce it to an appropriate extent. This is the mandate of section 273B. Once the burden is discharged by the person or assessee as to the existence of good and sufficient reason for not complying with the stipulation under section 271C, it is for the authorities to consider with proper application of mind, whether the penalty is to be waived or reduced, based on the facts and circumstances. Section 271C of the Income-tax Act is quite categorical. Its scope and extent of application is discernible from the provision itself, in unambiguous terms.

    Circular No. 551 dt. 23-1-1990 (1990) 183 ITR 7 (St) deals with the circumstances under which section 271C was introduced in the statute book, for levy of penalty. On deduction of tax, if there is delay in remitting the amount to the Revenue, it has to be satisfied with interest as payable under section 201(1A) of the Act, besides the liability to face the prosecution proceedings, if launched in appropriate cases, in terms of section 276B of the Act. This alone has been sought to be explained in the Circular issued by the CBDT. Even according to the CBDT, no penalty is envisaged under section 271C of the Act for non-payment of the tax deducted at source. Court also observed that, it is settled law that if the interpretation of a fiscal enactment is in doubt, the construction most beneficial to the subject or assessee should be adopted, even if it results in obtaining an advantage to the subject or assessee.

    Note : U. S. Technologies International Pvt. Ltd. v. CIT (2010) KHC 6118 ; and Classic Concepts Home India Pvt. Ltd. v. CIT (2016) 383 ITR 626 (Ker) (HC) is overruled.

    Lakshadweep Development Corporation Ltd. v. ACIT (TDS) (2019) 411 ITR 213 (FB) (Ker) (HC)

  4. S. 276C : Offences and prosecutions – Wilful attempt to evade tax – None of the authorities gave clear finding about evading tax wilfully – Minor lapse on the part of the assessee of not mentioning stock, undisclosed income in the facts of this case do not attract launch of prosecution- Prosecution proceedings were quashed [S.277, 278B]

    Allowing the petition to quash the prosecution proceedings the Court held that none of the authorities gave clear finding about evading tax wilfully. Minor lapse on the part of the assessee of not mentioning such a stock, undisclosed income in the facts of this case do not attract launch of prosecution under S. 276-C (i) and 277 read with S. 278-B of the Act. Accordingly, application is allowed by quashing and setting aside the impugned criminal proceedings launched by respondent and Rule is made absolute.

    N. R. Agrwal Industries Ltd v. JCIT(2019) 173 DTR 145 (Guj) (HC)

  5. S. 281 : Certain transfers to be void – Attachment of property – Transfer of property before assessment order was passed- Transfer is not void – Order of attachment by Tax recovery Officer is held to be void – [S. 156, 220 to 232, Second Schedule, R. 2, 4, 16(2), 48]

    On a writ petition challenging the order of attachment the Court held that the guarantor had filed a return of income on July 31, 2009. His case was selected for scrutiny. Notices under section 143(2) were issued in September 2010 and February 2011. A notice under section 142(1) was issued on February 23, 2011. The order of assessment was passed only on December 27, 2011 under section 143(3). Consequently, the demand notice under section 156 was issued only on December 27, 2011, giving the managing partner of the guarantor thirty days’ time. Even if the period of thirty days was counted from the date of the notice, i.e., December 27, 2011, the notice period would expire on January 26, 2012. Therefore, the managing partner of the guarantor became an assessee- in-default in terms of section 220(4) only on January 26, 2012. The tax recovery certificate was issued on January 9, 2014. The order of attachment was issued on March 14, 2018. But the mortgage was created by the guarantor in favour of the bank on July 11, 2011, much before the order of assessment was passed under section 143(3) on December 27, 2011. Hence the creation of the mortgage could not be said to have automatically become void in terms of section 281(1) merely because of the pendency of the proceedings under sections 143 and 142. It required something more to be done, but it was not done in this case. As a matter of fact even an investigation under Rule 11 was not carried out. Therefore, the order of attachment was illegal. On the date on which the order of attachment was passed, the property had already been sold by the bank, in exercise of the power conferred upon the bank under the 2002 Act. The order of attachment was set aside. The Sub-Registrar was to proceed to register the sale certificate issued by the bank upon compliance with the necessary formalities. (AY. 2009-10)

    ICICI Bank Ltd. v. TRO (2019)411 ITR 518 (T&AP) (HC)

    Black Money (Undisclosed Foreign Income and Assets) and Imposition Act, 2015. (2015) 375 ITR 1(St),

  6. S.50 : Punishment for failure to furnish return of income – Where the assessee did not disclose its foreign assets in the course of search as well as in the settlement commission proceedings, he was liable to prosecution under the provisions of Black Money Act. [S. 55, 71, ITA, S.153A]

In its return of income, the assessee did not disclose its 4 bank accounts maintained in a foreign bank which were inherited by him from his mother. The details of such accounts were found in the course of search and seizure. Assessee’s subsequent application to settlement commission was rejected on account of failure to make true and honest disclosure. The assessment was finally completed u/s. 153A considering the 4 bank accounts maintained outside India. In the proceedings under the Black Money Act, the assessee argued that he was prevented from making disclosure under the Black Money Act (S. 71) as the proceedings were pending u/s. 153A of the Act. It was further argued that the Black Money Act came into force on 1st April, 2016 and could not be given a retrospective effect. Held that the Authorities had invoked sections 50 and 55 of the Black Money Act and not section 71 to prosecute the petitioner. Further, the Petitioner had the opportunity to make disclosure under the Search as well as the Settlement proceedings, but it chose not to do so. The failure to disclose under section 153A of the IT Act, 1961 was punishable under the Black Money Act. Further, the failure to disclose on the part of the Petitioner was subsequent to the coming into force of the Black Money Act. It could therefore not be said that a retrospective effect was sought to be given to the Black Money Act. The assessee was liable for violation of the provisions of Black Money Act. Writ petition to quash the prosecution proceedings was dismissed. (AYs. 2009-10 to 2015-16)

Shrivardhan Mohta v. UOI (2019) 175 DTR 161/307 CTR 396/102 taxmann.com 273 (Cal.) (HC)

Editorial: Refer Black money Act, Circulars, clarification etc. (2015) 375 ITR 1(St), (2015) 374 ITR 35(St),(2015) 375 ITR 97(St), (2015) 375 ITR 128(St) , (2015) 378 ITR 8 (St)

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