1. 2(14) : Capital asset – Advance given to subsidiary – Loss – Held to be allowable as short term capital loss [S. 2(42A), 2(47)]

Dismissing the appeal of the revenue the Court held that, advance given to subsidiary which was written off is held to be allowable as short term capital loss. (Arising from ITA No. 3833/ M/21 dt. 31-03-2016) (ITA No. 1366 of 2017 dt. 26-08-2019) (AY. 2002-03)

CIT v. Siemens Nixdorf Information Systems Gmbh (2019) BCAJ- October-P. 63 (Bom) (HC)

2. 2(14)(iii) : Capital asset – Agricultural land – Capital gains – Agricultural lands and beyond 8 k.m., from the notified cities – Revenue records showing as agricultural lands – Department to prove that the entries in the revenue records and the patta were false or bogus – Entitle to exemption. [S.45]

Dismissing the appeal of the revenue the Court held that, the agricultural land sold by the assessee is beyond 8 k.m., from the notified cities and the revenue records showing as agricultural lands. It is for the department to prove that the entries in the revenue records and the patta were false or bogus. There is a presumption to the validity of such official document and if a party states that the entry is incorrect or the document is false, the onus is on the party to prove the same. There is no allegation made by the Assessing Officer that the patta, copy of which was furnished by the Tahsildar, is a bogus patta. Even going by the Adangal extracts, which were furnished by the VAO, on being summoned under Section 131 of the Act, court observed that in column no. 19 of the Adangal extract, the land has been described as “Tharisu”. Therefore, even going by the subsequent records, the character of the land is not stated to be non agriculture. A land, which is an agricultural land, at many a times, cannot be put to use for agricultural purposes. Merely because an agriculture activity could not be carried on for various reasons including natural causes, it will not cease to be an agricultural land. Accordingly the order of the Tribunal granting exemption is affirmed. (TANO. 1408 of 2019 dt 10-07-2019) (AY. 2011-12)

PCIT v. K. P. R. Developers Ltd. (2019) 311 CTR 832/ 183 DTR 406 (Mad.)(HC)

3. 2(22)(e) : Deemed dividend – loan to share holder – loan in the ordinary course of business – Not assessable as deemed dividend – Deemed dividend is exempt u/s 115O [S.10(34), 115O, Art. 226]

Allowing the petition the Court held that in the application before the Settlement Commission, the assessee had specifically stated that Rasi Seeds Pvt. Ltd. had advanced money to Rasi Tex Pvt. Ltd. in the ordinary course of business. The money so received was utilised for its working capital requirements and no part of it was diverted as loan or advance for direct or indirect benefit of any of the directors, including the assessee. It was further stated therein that these funds were given as inter corporate loans on which interest was charged at market rates. The interest charged by Rasi Seeds Pvt. Ltd. have been assessed as business income by the same Assessing Officer, who was also the Assessing Officer of the assessee. The only finding by the Settlement Commission in this regard was that the lending of money did not form a substantial part of the business of Rasi Seeds Pvt. Ltd. When the facts which were specifically referred to in the application and contended before the Settlement Commission had not been disputed, it could not be said that the assessee had failed to explain before the Commission that the transactions were during the ordinary course of business. The dividend was not taxable as per the provisions of section 10(34) of the Act and the contrary findings in the order of the Settlement Commission were violative of the statutory provisions and therefore illegal. It was not in dispute that during the assessment years 2012-13 and 2013-14, there were more than one shareholder holding substantial interests in Rasi Seeds Pvt. Ltd. and Rasi Tex Pvt. Ltd. The Settlement Commission was also apprised of this fact that there were two shareholders having substantial interests in Rasi Tex Pvt. Ltd. The loan from Rasi Seeds Pvt. Ltd. was not made directly to the specific shareholder and as more than one shareholder was to be treated as specified shareholder for the purposes of section 2(22)(e) for the loan from Rasi Seeds Pvt. Ltd. to Rasi Tex Pvt. Ltd. the section could not be applied for the relevant assessment years for the reason that the computation of the section failed since the section did not provide for making the amount of loan to be added in the hands of more than one shareholder or dividing the amount of loan between specified shareholders in any ratio. Since the computation of the section itself failed, it necessarily would follow that the charge of the section for the assessment years 2012-13 and 2013-14 would also fail. The ground of absence of incriminating material in relation to deemed dividend, was placed before the Settlement Commission but not considered. The order of the Settlement Commission was not in accordance with the provisions of the Act and therefore, it was liable to be quashed. (AYs 2007-08 to 2013-14)

R. Chitra v. ITSC Vice Chairman (2019) 418 ITR 530 (Mad) (HC)

4. 2(35) : Principal officer – Notice must mention some connection with the management or administration of the company – Merely on surmises and conjectures, no person shall be treated as a Principal officer
   [Art. 226]

The assessee is treated as a Principal Officer of the Company Kingfisher Airlines Ltd. for the financial years 2009-10 to 2012-13 u/s. 2(35) of the Act. The said notice is challenged mainly on the ground that the objections submitted to the notice issued had not duly considered. Allowing the petition the Court held that, notice must mention some connection with the management or administration of the company. Merely on surmises and conjectures, no person shall be treated as a Principal officer. Accordingly the notice is quashed. (WP No. 34252 of 2018 dt. 17-10-2019)

A. Harish Bhat v. ACIT (2019) CTCJ-December-P. 170 (Karn)(HC)

5. 2(42A) : Short-term capital asset – Assignment of loan – Loss arising out of assignment of loan is allowable as short term capital loss. [S. 2(14), 2(42B), 28 (i)]

Dismissing the appeal of the revenue the Court held that Loss arising out of assignment of loan is allowable as short term capital loss. Followed Siemens Nixdorf Informations Systems GmbH v. Dy. DIT(IT) (2016) 158 ITD 480 (Mum) (Trib.) affirmed in Dy. DIT v. Siemens Nixdorf Informations Systems GmbH ITA No. 1366 of 2017 dt 26-08-2019)(ITA No. 623 of 2017 dt 26-08-2019) (AY. 2007-08)

PCIT v. Reliance Natural Resources Ltd (2019) 267 Taxman 644 (Bom) (HC)

6. 4 : Charge of income-tax – Capital or revenue – Business of accepting deposits from members and lending the same to non members – Waiver of deposit – Waiver of principal component of deposits and debentures – Capital receipts [S.28(i)]

The assessee is carrying on the business of accepting deposits from members and lending the same to non members. The assessee treated the waiver of principal component of deposits and debentures as capital receipts. The AO treated the same as revenue receipts. Tribunal confirmed the order of the AO. On appeal high Court held that waiver of principal component of deposits and debentures constituted capital receipt. Followed ITA No 99 of 2009. (AYs 2007-08, 2008-09)

Manipal Sowbhagya Nidhi Ltd. v. Dy. CIT (2019) 112 Taxman.com 325 / (2020) 268 Taxman 330 (Karn.) (HC)

Editorial: SLP of revenue is dismissed Dy CIT v. Manipal Sowbhagya Nidhi Ltd (2020) 268 Taxman 329 (SC)

7. 5 : Scope of total income – Accrual – Year of taxability – Income accrues only when it becomes due – When the other party accepts the liability to pay the amount [S. 4, 145]

The assessee is in the business of promoter and developer of land. It sold the land under a memorandum of understanding (MOU) for a consideration of 120 crore. The assessee offered only ₹ 100 crore for tax in the year 2012-13 as the MOU provided that a sum of ₹ 20 Crore would be paid by the purchaser on execution of sale deed after getting plan sanctioned and on inclusion of the name of the purchaser in the 7/12 extract. However the AO taxed entire sum of ₹ 120 crore in the assessment year 2012-13 only. On appeal CIT(A) also confirmed the order of the AO. On further appeal the Tribunal deleted the addition following the ratio in Morvi Industries Ltd v. CIT (1971) 82 ITR 835 (SC). On appeal by the revenue dismissing the appeal of the Court held that, the income accrues only when it becomes due when the other party accepts the liability to pay. Followed CIT v Shoorji Vallabdas & Co (1962) 46 ITR 144 (SC), the Court also referred CIT v. Nagri Mills Co. Ltd. (1958) 33 ITR 681 (Bom) (HC) wherein the High Court held that when the tax rate is the same the department should not fritter away the energies in fighting matters. (ITA No 306/Pun/ 2015 dt. 09-02-2017) (AY. 2012-13) (ITA No 1345 of 2017 dt. 18-11-2019)

PCIT v. Rohan Projects (2020) BCAJ-January- P.46 (Bom) (HC)

8. 10(24) : Association of trade unions – Amount received on settlement of dispute between company and its workers – Amount disbursed to workers – Amount not assessable in hands of trade union

Allowing the appeal of the assessee the Tribunal held, that once the factum of settlement was not disputed coupled with the factum of receipt of a particular amount from the company, and the amount had been distributed amongst the employees, the case would squarely stand covered under S. 10(24) of the Act. Though the contribution from the employer was received as per the settlement agreement, it was only incidental to the activities of the services of the assessee in resolving the dispute between the member workers and the employer with the intention of advancement of welfare of the members. The amount was not assessable as income of the assessee. (AY. 2009-10)

Gujarat Rajya Kamdar Sabha Union Machiwadi v. ITO (2020) 421 ITR 341 / 312 CTR 313 (Guj) (HC)

9. 10B : Export oriented undertakings – Total turnover- Foreign currency expenditure incurred for providing software development services outside India cannot be excluded from export turnover for purpose of computing deduction- When expenditure incurred in foreign currency on account of telecommunication expenses is excluded from export turnover, said expenditure has to be excluded from total turnover also for purpose of computation of deduction [S. 80HHC, 80HHE]

Dismissing the appeal of the revenue the High Court held that foreign currency expenditure incurred for providing software development services outside India cannot be excluded from export turnover for purpose of computing deduction. High Court also held that when expenditure incurred in foreign currency on account of telecommunication expenses is excluded from export turnover, said expenditure has to be excluded from total turnover also for purpose of computation of deduction. Followed CIT v. Tata Elxsi Ltd (2012) 349 ITR 98 (Karn) (HC), affirmed in CIT v HCL Technologies Ltd. (2018) 404 ITR 719 (SC) (AY. 2003-04, 2004-05)

CIT v. Mphasis Ltd (2016) 74 taxmann.com 274 (Karn) (HC)

Editorial : SLP of revenue is dismissed; CIT v. Mphasis Ltd. (2020) 269 Taxman 3 (SC)

10. 11 : Property held for charitable purposes-Company set up for prevention of pollution- Preservation of environment is an object of general public utility- Entitle to exemption. [S. 2(15), 12A, Companies Act, S.25]

Dismissing the appeal of the revenue the Court held that Company set up for prevention of pollution is preservation of environment is an object of general public utility hence entitle to exemption. (AY. 2009-10)

CIT v. Naroda Enviro Projects Ltd. (2019)419 ITR 482 (Guj)(HC)

11. 11 : Property held for charitable purposes – Accumulation of income- Form No 10 was filed belatedly – Rejection of claim on technical formalities is held to be not valid- AO is directed to decide the allowability of claim on merits [S.11(2), 139(9), 143(1) 154]

Assessee filed its return which was processed under S. 143(1) of the Act. Subsequently, assessee filed application under S. 154 contending that by mistake it had not filed Form No. 10 along with extract of Board Resolution for accumulation of funds for purpose of construction of a temple at a particular property as envisaged under S. 11(2) which in turn permitted assessee to not include said income for taxation purposes. AO rejected assessee’s application holding that return filed by assessee was not accompanied with Form No. 10 and Board Resolution, and even if Board Resolution with Form No. 10 had been enclosed with return, such filing would have been beyond time under section 139(9) and, thus, assessee could not be allowed for accumulation of income under S. 11(2) of the Act. Tribunal upheld order of the AO. On appeal High Court held that when assessee was entitled to a statutory benefit, it was incumbent upon concerned authority to examine admissibility of benefit than to foreclose assessee on technicalities. Therefore, order was to be set aside and, matter was to be remanded back to AO. to take note of Form No. 10 accompanied by Board Resolution and, thereupon, take a decision on merits. Accordingly the matter was remanded.
(AY. 2008-09)

Chandraprabhuji Maharaj Jain Juna Mandir Trust v. DCIT (2019) 266 Taxman 399 (Mad) (HC)

12. 12A : Registration –Trust or institution – 71% of the receipt were spent in accordance with the object of the Trust – Partial expenditure were spent on religious – Trust is held to be genuine – Entitle for registration – Benefit of S.11 is not available only to the extent of partial expenditure which were spent on religious [S.11]

Dismissing the appeal of the revenue the Court held that at stage of registration, question of application of income of trust is premature. DIT(E) rejected petitioner’s application for registration under S. 12A on ground that 29 per cent of its gross receipts were expended on making donations for religious purposes which was not in accordance with objects of trust. Court held that 71 per cent of receipt of trust were being spent in accordance with its object, it was established that trust was genuine. Court also held that spending a partial expenditure which was not authorized by trust would not make trust non-genuine and only consequences would be that benefit of S. 11 would not be available to that extent.

CIT v. Manekji Mota Charitable Trust. (2019) 267 Taxman 16 (Bom)(HC)

13. 14A : Disallowance of expenditure – Exempt income – Disallowance cannot exceed exempt income earned – Tribunal restricting disallowance to extent offered by assessee is held to be proper [R.8D]

Dismissing the appeal of the revenue the Court held that the disallowance of expenditure incurred to earn the exempt income could not exceed the exempt income earned. The ratio of the decisions in the cases of Cheminvest Ltd. v. CIT(2015) 378 ITR 33 (Delhi) (HC)) and CIT v. Holcim India (P) Ltd. (I.T.A. No. 486 of 2014 decided on September 5, 2014 (Delhi) (HC)) would include a facet where the assessee’s exempt income was not nil, but had earned exempt income which was more than the expenditure incurred by the assessee in order to earn such income. The order of the Tribunal which restricted the disallowance of the expenditure to the extent voluntarily offered by the assessee was not erroneous. (AY. 2009-10)

CIT v. HSBC Invest Direct (India) Ltd. (2020) 421 ITR 125 (Bom) (HC)

14. 14A : Disallowance of expenditure – Exempt income – When there is no exempt income declared during the year no disallowance can be made. [R.8D(2) (ii)]

Dismissing the appeal of the revenue the Court held that, when there is no exempt income declared during the year no disallowance can be made. Followed Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Delhi) (HC), CIT v. Shivam Motors Pvt. Ltd. (2015) 230 Taxman 63 / 272 CTR 277 (All) (HC), PCIT v. Man Infraprojects Ltd. ITA No dt 9-04 2019. (ITA No. 5241 / 2013 dt 18-10 2016) (ITA No. 1124 of 2017 dt. 27-01-2020) (AY. 2008-09)

Editorial: Also refer, PCIT v. Ballapur Industries Ltd (ITA No. 51 of 2016, dt. 13.10.2016) (Bom.) (HC), www.itatonline.org, PCIT v. Oil Industries Development Board (2019) 262 Taxman 102 (SC), www.itatonline.org, Cheminvest Ltd v. ITO (2009) 27 DTR 82 /124 TTJ 577 / 121 TTD 318 (SB) (Delhi) (Trib.)

PCIT v. Khoinoor Project Pvt. Ltd. (Bom) (HC) (UR)

15. 28(i) : Income from business – Income from house property – Exploitation of property commercially by way of complex commercial activities – Rental income is to be taxable as income from business – Not as Income from House Property [S.22]

Assessee declared its income under the head Income from Business. The AO however, treated the same as Income from House Property which was affirmed by the CIT (A). Tribunal decided the issue in favour of the assessee. On appeal before the High Court, question raised is “Whether, on the facts and in the circumstance of the case and in law, the Hon’ble Tribunal was justified in holding that the assessee had exploited its property commercially by way of complex commercial activities and hence, the rental income received by the assessee to be taxable as income from business and not under the head “Income from House Property ?” The Honourable Court considered the object clause of the company and various services provided such as marketing and promotional activities and also organising various events and programs. Court also noted in the context of the revenue sharing agreement copies of which have been placed on record on which the revenue receives not only license fee of the amounts specified therein and percentage of net revenue. In some of the agreements the compensation is either license fee or percentage of net revenue, whichever is higher. The Intention of the Assessee is also a material circumstance and the objects of Association, the kind of services rendered clearly point out that the Income is from Business. All the factors cumulatively taken demonstrate that the assessee had intended to enter into a Business of renting out commercial space to interested parties. The other income is only an income which is a dividend income from the deposits received from the Business income. Therefore, considering all these factors which have been enumerated above and referred to by the Tribunal, the findings rendered by the Tribunal on assessment of the factual position before it that the income in question has to be treated as business Income. Referred Chennai Properties and Investments Ltd. v. CIT [2015] 373 ITR 673 (SC) Raj Dadarkar, Associates v. ACIT[2017] 394 ITR 592 /81 taxmann.com 193 (SC) PCIT v. Krome Planet Interiors (P.) Ltd [2019] 107 taxmann.com 443 / 265 Taxman 308 (Bom) (HC). (ITA No. 1783/Mum/ 2015 dt. 23-09-2016 (ITA No. 1583 of 2017 dt 13-01-2020) (AY.2010-11)

PCIT v. City Centre Mall Nashik Pvt. Ltd (Bom) (HC) (UR)

16. 28(i) : Business loss – Business expenditure – Obsolescence allowance – Write of off obsolete stock – Allowable as business loss [S. 37(1) 145A]

Dismissing the appeal of the revenue the Court held that the obsolete stock which was not disposed of or sold was allowable as expenditure. Order of Tribunal is affirmed.

CIT v. Gigabyte Technology (India) Ltd. (2020) 421 ITR 21 (Bom) (HC)

17. 32 : Depreciation – Residential flats – Accommodation of employees – Entitle for higher rate of depreciation

Dismissing the appeal of the revenue the Court held that, residential flats built by assessee-company for accommodation of its employees was to be regarded as building used for purpose of business of company and thus, assessee was entitled to claim high rate of depreciation on said flats. i.e. @ 10 %. (AY. 2000-01)

CIT v. Ashok Leyland Ltd. (2019) 266 Taxman 406 (Mad) (HC)

18. 37(1): Business expenditure – Cheque issued – Realised in next assessment year – Cheque is not dishonoured but encashed, payment relates back to date of tendering of cheque and date of payment would be date of delivery of cheque – Allowable as deduction during previous year

Assessee paid municipal tax for which cheques were issued to local authority prior to end of previous year relevant to assessment year, however, bank statements showed realization only on commencement of next assessment year, deduction in respect of such municipal tax was to be allowed during previous year. When a cheque is not dishonoured but encashed, payment relates back to date of tendering of cheque and date of payment would be date of delivery of cheque. Followed CIT v Ogale Glass Works Ltd. (1954) 25 ITR 529 (SC) (Arising from Punalur Paper Mills Ltd. v. ITO (2009) 29 SOT 449 (Cochin) (Trib) (ITA Nos. 1378 to 1423 of 2019 dt. 7-2-2019) (AY. 1996-97 to 2002-03 2004-05)

CIT v. Punalur Paper Mills Ltd. (2020) 268 Taxman 47 (Ker) (HC)

19. 37(1) : Business expenditure – Business loss – Write off of losses towards stock obsolescence in respect of Laptops and motherboards – Held to be allowable as revenue expenditure [S. 28(i), 145A]

Dismissing the appeal of the revenue the Court held that the Tribunal is justified in holding that write off of losses towards stock obsolescence in respect of Laptops and motherboards is held to be allowable as revenue expenditure. Followed CIT v Heredilla Chemicals Ltd (2002) 255 ITR 532 (Bom) (HC) (ITA No. 28 of 2014 dt 7-1-2020)

CIT v. Gigabyte Technology (India) Ltd (Bom) (HC) (UR)

20. 37(1) : Business expenditure –Capital or revenue – Non-compete fee – Agreement was only for 18 months – Allowable as revenue expenditure

Assessee is engaged in business as Registrar and Transfer Agent licensed by SEBI. It entered into a non-compete agreement and the tenor of agreement was only 18 months. AO treated the payment as capital in nature. Tribunal allowed the claim as revenue in nature. On appeal by the revenue the Court held that it could not be stated that assessee derived any enduring benefit due to payment effected by it to said person for obtaining certain commitments and restricting himself from indulging in any competition with business of assessee or from weaving away employees. therefore, non compete fee had to be treated as a revenue expenditure. Followed Asianet Communications Ltd. v. CIT 2018) 407 ITR 706 (Mad) (HC)
(AY. 2014-15)

CIT v. Computer Age Management Services (P.) Ltd. (2019) 267 taxman 146 (Mad) (HC)

21. 37(1) : Business expenditure – Construction business – Expenditure incurred subsequent to sale of building – Held to be allowable as revenue expenditure. [S. 145]

Dismissing the appeal of the revenue the Court held that assessee which is engaged in the business of construction and sale of residential and commercial building complexes expenditure for completing its construction during financial year subsequent to sale of building, such expenditure was liable for deduction. Court held that in order to claim deduction of business expenditure, it is not necessary that amount has been actually paid or expended during relevant accounting year itself and it is sufficient that liability for payment had incurred or accrued during relevant accounting year and actual payment of amount or discharge of liability may occur in future. (AY. 2009-10)

CIT v. Oberon Edifices & Estates (P.) Ltd. (2019) 267 taxman 118 (Ker) (HC)

22. 37(1) : Business expenditure – Capital or revenue – Insurance premium on purchase of new car – Held to be revenue expenditure

Dismissing the appeal of the revenue the Court held that the insurance premium paid by the assessee towards purchase of the new car was revenue in nature, and should be allowed in the year in which it was incurred. (AY. 2011-12)

PCIT v. Shah Virchand Govanji Jewellers Pvt. Ltd (2019] 418 ITR 472 (Guj) (HC)

23. 37(1) : Business expenditure –Social responsibility – Agreement with State Government to construct houses for poor people affected by floods – Held to be allowable on commercial expediency

Allowing the appeal of the assessee the Court held that the assessee was carrying on the business of iron ore and also trading in iron ore. Thus, day in and day out the assessee would be approaching the appropriate Government and its authorities for grant of permits, licences and as such the assessee in its wisdom and as a prudent business decision had entered into a memorandum of understanding with the Government of Karnataka and incurred the expenditure towards construction of houses for the needy persons, not only as a social responsibility but also keeping in mind the goodwill and benefit it would yield in the long run in earning profit which was the ultimate object of conducting business and as such, expenditure incurred by the assessee would be in the realm of business expenditure. The amounts were deductible. (AY. 2011-12, 2012-2013)

Kanhaiyalal Dudheria v. JCIT (2019) 418 ITR 410 / 310 CTR 617 / 182 DTR 57 (Karn) (HC)

24. 40(a)(ia) : Amounts not deductible – Deduction at source – Interest paid to resident – Second proviso to S. 40(a)(ia) is applicable – No disallowance can be made

High Court dismissed the appeal of the revenue by holding that second proviso to S. 40(a)(ia) is applicable to relevant assessment year. Followed Ansal Land Mark Township (P) Ltd. v. CIT (2015) 377 ITR 635 (Delhi) (HC). (AY. 2010-11)

PCIT v. Noida Software Technology Park Ltd. (2020)113 taxmann.com 144/ 269 Taxman 11 (Delhi) (HC)

Editorial: SLP of revenue is admitted, PCIT v. Noida Software Technology Park Ltd. (2020) 269 Taxman 10 (SC)

25. 40(a)(ia) : Amounts not deductible – Deduction at source – Payee reflected the said amount as it tax liability – No disallowance can be made

AO made disallowance in respect of certain payments made by assessee on which tax had not been deducted at source. Tribunal deleted said disallowance on ground that payee had reflected said amount as its tax liability in its return. High Court affirmed the order of the Tribunal. Followed CIT v. Rajinder Kumar (2014) 362 ITR 241 (Delhi) (HC), CIT v. Ansal Land Mark Township Pvt. Ltd. (2015) 377 ITR 635 (Delhi) (HC).

PCIT v. Shivaai Industries (P.) Ltd. (2020) 269 Taxman 54 (Delhi) (HC)

Editorial : SLP is granted to the revenue; PCIT v. Shivaai Industries (P.) Ltd. (2020) 269 Taxman 53 (SC)

26. 40(a)(ia) : Amounts not deductible – Deduction at source – Second proviso to S. 40(a)(ia) of the Act inserted by Finance Act, 2012 is clarificatory and retrospective in nature – No disallowance can be made where the recipient of the amount has already discharged his tax liability therein [S. 40(a), 139(1)]

The Question before the High Court was “Whether the second proviso to S. 40(a)(ia) of the Act inserted by Finance Act, 2012 is clarificatory and retrospective in nature and disallowance under S. 40(a)(ia) of the Act by the Tribunal is justifiable where the recipient of the amount has already discharged his tax liability therein?” High court answered the question in favour of assessee and against the revenue. followed flowing case laws. CIT v. Ansal Land Mark Township P. Ltd. (2015) 377 ITR 635 (Delhi) (HC) CIT v. Calcutta Export Company (2018 404 ITR 654 (SC) PCIT v. Manoj Kumar Singh; [2018] 402 ITR 238 (All) (HC), PCIT v Perfect Circle India Pvt. Ltd (Bom) (HC). (ITA No 707 2016 dt 07-01-2019s) PCIT v. Shivpal Singh Chaudhary [2018] 409 ITR 87 (P&H) (HC) Deeva Devi (Smt) v. PCIT (Karn) (HC) (WP No. 3928 /2018 dt. 20-02-2018). Distinguished Thomas George Muthoot v. CIT. (2015)235 Taxman 246/ (2016) 287 CTR 101 (Ker) (HC) (Approved Rajeev Kumar Agarwal v. Add.CIT (2014) 34 ITR 479 (Agra) (Trib))

CIT v. Anand, S. M. (2019) 311 CTR 795 (Karn)(HC)

27. 45: Capital gains – Surrender of tenancy rights – Assessable as capital gains and not as income from other sources – Invested in capital bonds is eligible for exemption u/s 54EC of the Act [S.48, 54EC, 56]

The assessee is an HUF on surrender of tenancy rights received compensation of ₹ 50 lakh which was invested in capital bonds and claimed exemption u/s. 54EC of the Act. The AO treated the amount received on surrender of tenancy rights as income from other sources and denied the exemption u/s. 54EC of the Act. Order of the AO is affirmed by the Tribunal. On appeal by the assessee allowing the appeal of the High Court held that the assessee had disclosed the amount of ₹ 50 lakh received from M/s. Carlton Coats Pvt. Ltd. for settlement of its claim to the property and had further disclosed that the said amount was invested in capital bonds. Thus the said amount was received by the assessee as long term capital gains in view of surrender of rights by the assessee vis-a-vis the property in question. In the circumstances, merely on the basis of suspicion, the revenue authorities ought not to have rejected the claim of the assessee that the said amount was received as long term capital gains but to treat the said amount as income from other sources. (ITA No. 4511/Mum/2016 dt 24-08-2016, (AY. 2009- 10).) ITA No 1219 of 2017 dt 27-01-2020

Amol C. Shah (HUF) v. ITO (Bom) (HC) (UR)

28. 45 : Capital gains – Family arrangements – If there is no pre-existing right, the family arrangement constitutes a transfer – Merely because dispute involved some family members and such dispute is ultimately settled by filing consent terms, the same cannot be styled as a family arrangement or family settlement so as to hold that the consideration received as a result of such settlement, does not constitute capital gain – Reassessment is also held to be valid [Ss.147, 148, 149, 151]

Dismissing the appeal of the assessee the Court held that a family settlement which is a settlement amongst family members in the context of their ‘pre-existing right’ is not a “transfer”. Such a settlement only defines a pre-existing joint interest as a separate interest. However, if there is no pre-existing right, the family arrangement constitutes a “transfer”. Merely because dispute involved some family members and such dispute is ultimately settled by filing consent terms, the same cannot be styled as a family arrangement or family settlement so as to hold that the consideration received as a result of such settlement, does not constitute capital gain. Referred Maturi Pullaiah v. Maturi Narasinham, AIR 1966 SC 1836. Court also upheld the reassessment proceedings. (AY. 1999-2000) (ITA 2012 dt. 8-11-2019)

P. P. Mahatme, Power of Attorney, Lorna Margaret Pinto v. ITO (2020) 420 ITR 71/ 226 Taxman 186 (Bom) (HC) www.itatonline. org

29. 54 : Capital gains – Profit on sale of property used for residence – Additional cost of construction incurred within stipulated time though not deposited in capital gains account – Entitled to deduction [Ss. 45, 54F, 264, Art. 226]

Allowing the petition the Court held that the assessee had claimed that it had utilised the disputed sum towards the cost of the additional construction within the period of three years from the date of the transfer and therefore, if such contention were factually correct, the assessee had to be held to have satisfied the mandatory requirement under S. 54(1) to get the deduction. Matter remanded to verify whether the sum was utilised by the assessee within the time stipulated under S. 54(1) for the purpose of construction. If such utilisation was found to have been made within such time, the Department was bound to grant deduction.

Venkata Dilip Kumar v. CIT (2019)419 ITR 298 (Mad) (HC)

30. 54F : Capital gains – Investment in a residential house – The assessee is entitled to the withdrawal of the amount deposited under Sub-Section (4) of Section 54F of the Act under the capital gain account subject to deduction of tax applicable to the case on hand [S.45, 54F(4)]

The petitioner had sold two properties. From the sale consideration amount, ₹ 1,15,00,000/- was deposited by the petitioner in the Capital Gain Account Scheme, 1988. The return of income for the Assessment year 2013-14 was filed on 14-7-2013 and exemption was claimed under S. 54F of the Act. In the meantime, the petitioner had purchased a flat for ₹ 21,32,470/- (including stamp duty and registration) on
20-08-2013 before the expiry of three years from the date of the transfer of the capital asset. The revenue issued the notice impugned, to bring the unutilized capital gain to tax as per S. 54 F(4) of the Act. In other words, the unutilized amount (₹ 1,15,00,000 – ₹ 21,32,470 deducting exemption) after the expiry of three years from the date of transfer of the original capital is proposed to be subjected to tax under Section 45 of the Act. On writ the the petitioner argued that the scope of Section 54F(4) of the Act and the proviso thereof is not properly appreciated by the respondent. The petitioner had deposited the sale consideration received on transfer of certain capital assets in the capital gain account scheme with the bankers and utilized ₹ 21,32,470/- out of ₹ 1,15,00,000/- capital gain amount deposited which squarely falls under the proviso to section 54F(4) of the Act. High Court held that the respondent failed to interpret the phrase ‘wholly or partly’ enumerated in the proviso in a right perspective. According to the petitioner, the amount deposited under Section 54F (4) of the Act if utilized partly for the purchase or construction of the new asset within three years, then the unutilized amount shall not be liable to tax under Section 45 of the Act. it is clear that the proviso appended to Section 58[4][f] has to be read as a whole along with the Clauses [a] and [b] therein which would explain the real intendment of the phrase “not utilized wholly or partly”. In the context, the proviso to Section 54 F[4] becomes an integral part of the enactment acquiring the tenor and colour of the main provision. To make the provision workable, the arguments of the petitioner that the Clauses [a] and [b] of the proviso need not be addressed to, cannot be countenanced for the reasons aforesaid. Thus, it can be held that on reading of the provision as a whole along with Clauses [a] and [b] to the proviso, the intention of the Legislature would be gathered that the unutilized capital gain amount under Section 54 F[4] has to be charged under Section 45 as income of the previous year, after the expiry of three years from the date of sale of the capital asset which in the present case is the assessment year 2016-17 In the circumstances, the assessee is entitled to the withdrawal of the amount deposited under Sub-Section (4) of Section 54F of the Act under the capital gain account subject to deduction of tax applicable to the case on hand. (AY. 2016-17)

P. N. Shetty v. ITO (2019) 181 DTR 97/ 310 CTR 359/ 266 Taxman 15 (Karn) (HC)

31. 68 : Cash credits – The expression “any previous year” does not mean all previous years but the previous year in relation to the assessment year concerned – If the cash credits are credited in the FY 2006-07, it cannot be brought to tax in a later AY. 2009-10 [S.3]

The question before the High Court was “On the facts and in the circumstances of the case and in law, whether the Tribunal was right in sustaining the additions made of old outstanding sundry credit balances” Allowing the appeal of the assessee the Court held that, the expression “any previous year” does not mean all previous years but the previous year in relation to the assessment year concerned. If the cash credits are credited in the FY 2006-07, it cannot be brought to tax in a later AY. 2009-10. Followed CIT v. Bhaichand H. Gandhi (1983), 141 ITR 67 (Bom) (HC) CIT v. Lakshman Swaroop Gupta & Brothers (1975), 100 ITR 222 (Raj) (HC) Bhor Industries Ltd v. CIT AIR 1961 SC 1100 (ITA No. 29 of 013, dt. 14-02-2020) (AY. 2009-10)

Ivan Singh v. ACIT (Bom)(HC)(Goa Bench), www.itatonline.org

32. 68 : Cash credits – Share capital – Substantial part of share application money was received in earlier assessment years – Balance amount sufficient evidence was produced such as identity and genuineness – Deletion of addition is held to be valid

Dismissing the appeal of the revenue, the Court held that, substantial part of share application money was received in earlier assessment year accordingly the amount could not be added in impugned assessment year Balance amount sufficient evidence was produced such as identity and genuineness. Order of Tribunal is affirmed. (Arising from ITA No. 4836/Mum/ 2011 dt 30-06-2016)(ITA No. 957 of 2017 dt 4-11-2019)(AY. 2007-08)

PCIT v. Realvalue Realtors (P) Ltd. (2020) 113 taxmann.com 62 (Bom) (HC)

33. 68 : Cash credits – Identity of creditor established – Need not prove the source of the source – Addition confirmed by the Tribunal is deleted

The assessee had taken unsecured loan from various persons. The Assessee has filed the confirmation letters. The AO has doubted the genuineness of the loan and made addition as cash credits. The Tribunal also confirmed the addition. On appeal by the assessee allowing the appeal the Court held that the assessee need not prove the source of the source. Accordingly the addition was deleted. Followed PCIT v. Veedhata Tower Pvt. Ltd. (2018) 403 ITR 415 (Bom) (HC). (ITA No. 6160 /Mum/2016 dt. 11-05-2017 (AY. 2010-11) (ITA No 1750 of 2017 dt. 22-01-2020)

Gaurav Triyugi Singh v. ITO (Bom) (HC) (UR)

34. 68 : Cash credits – Share application money and share premium – Identity, genuineness of transaction, creditworthiness is proved – Deletion of addition is held to be justified

Dismissing the appeal of the revenue the Court held that, the assessee has proved, identity, genuineness of transaction, creditworthiness of the share application money and share premium hence deletion of addition by the Tribunal is held to be justified. Addition cannot be made as cash credits. (ITA No 4607 /Mum/2012 AY. 2008-09 dt. 18-10-2016) ITA No 991 of 2017 dt. 4-11-2019)

PCIT v. Shree Rajalakshmi Textile Park Pvt. Ltd. (2020) BCAJ-January-P. 46 (Bom) (HC)

35. 68 : Cash credits – VDIS – Declaration of diamond jewellery – Sale of items after smelting – Weight of gold not disputed – Addition as cash credit is held to be not justified – Assessable as capital gains [S. 45, VDIS 1997, S. 65]

Assessee voluntarily disclosed gold and diamond jewellery u/s. 65(1) of VDIS, 1997 which was accepted and certificate was issued u/s. 68(2) of the Act. Assessee filed return by declaring negative income from sale of above said VDIS declared gold and diamond jewellery items, which had been converted into bullion after smelting and separating diamonds through a goldsmith. AO rejected assessee’s claim and brought entire sale consideration of VDIS declared items to tax under S. 68 of the Act. Tribunal upheld the order of the AO. On appeal the Court held that AO had not disputed weight or gold sold by assessee after smelting it from jeweller. Moreover, Tribunal in its various decisions in case of other assessee’s who were similarly placed, had accepted capital gain declared on sale of VDIS declared items after smelting them through various jewellers. Accordingly the Tribunal committed an error in not accepting sale invoices submitted by assessee on ground that it was not same items which had been shown and declared by them in VDIS. Addition was deleted. (AY. 1998-99)

Bhurat Sunilkumar (HUF) v. ITO (2019) 267 taxman 139 (Karn)(HC)

36. 68 : Cash credits – Peak credit theory – Hawala transactions – Money laundering can be for oneself – Refusal to divulge details of persons from whom money was distributed – Entire amount to be added as income on basis of peak credit theory – Estimation of commission again at 2% as alleged commission shall be only on the amounts deposited, other than the incremental peak credit adopted for each year – Appeal is dismissed [Ss. 69, 69A]

Assessee had been carrying on a lodge it opened various bank accounts in the name of partnership firms constituted of the relatives and employees of the assessee. Substantial amounts came into such Bank accounts in all the subject assessment years and there were withdrawals made immediately on the deposits having come to the account. The AO added the peak credit in the accounts recovered were assessed under Ss. 68, 69 and 69A as unexplained cash credits and investments. Considering the fact that the entire transactions were hawala transactions, commission at the rate 2 per cent was also assessed as income of the assessee. The assessee contended that very allegation of hawala transaction would indicate that money which came into the accounts did not belong to assessee; but to those persons to whom it was distributed and, thus, there could not have been any addition made on the basis of peak credit. Tribunal upheld the addition. On appeal High Court held that money laundering can also be for oneself and there can be no presumption that it is for others, especially when the assessee refuses to divulge the details of the persons to whom money was distributed. When the assessee contested the proceedings with a stout denial and nothing more; various accounts being found to have been opened and operated on behalf of the assessee, the entire deposits therein had to be treated as assessee’s income. The AO himself adopted the peak credit in each year, which again was modified to incremental peak credit. Court held that the assessee cannot dissociate himself from the various accounts in view of the overwhelming evidence unearthed by the department connecting him to the various accounts maintained in the Bank and the depositions of the various witnesses summoned. Despite the fact that the Enforcement Directorate had found the assessee to be a hawala operator or money launderer, the assessment under Ss. 68, 69 and 69A of the incremental peak credit of the respective years, in the subject assessment years, taken from all the accounts to be perfectly in order. There can be a reasonable assumption that the incremental credit would be the income of the assessee, the remittances being found in favour of the assessee and the disbursal not having been proved or even admitted. As regards commission when incremental peak credits are taken as the income of the assessee for a particular year the said quantum shall not be treated for the purpose of 2 per cent commission and no addition shall be made on that count. Hence the commission shall be only on the amounts deposited, other than the incremental peak credit adopted for each year. (AY. 2002-03 to 2005-06)

K. P. Abdul Majeed v. ACIT (2019) 267 taxman 151 (Ker) (HC)

37. 68 : Cash credits – Share capital – Identity of the investors were not in doubt – Furnished PAN, copies of the income tax returns of the investors as well as copy of the bank accounts in which the share application money was deposited in order to prove genuineness of the transactions – Not required to prove source of the source – Deletion of addition by the Tribunal is held to be justified

Dismissing the appeal of the revenue the Court held that, the identity of the investors were not in doubt. The assessee had furnished PAN, copies of the income tax returns of the investors as well as copy of the bank accounts in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, the bank accounts of the investors showed that they had funds to make payments for share application money. The assessee was not required to prove source of the source. Nonetheless, the inquiries through the investigation wing of the department at Kolkata proved source of the source (PCIT v. NRA Iron & Steel (2019) 412 ITR 161 (SC) distinguished) (ITA No. 1231 of 2017, dt. 29-01-2020) (AY. 2010-11)

PCIT v. Ami Industries (India)P. Ltd. (Bom)(HC), www.itatonline.org

38. 69 : Unexplained investments – Capital gains – Sale of property – Stamp valuation – Legal fiction cannot be invoked to make addition – Merely on the basis of stamp valuation addition cannot be made [Ss. 45, 50C, 69B, 263, Art, 265]

The assessee purchased a piece of land. Assessment was completed. Subsequently the order was set aside in revision and an addition was made to his income under S. 69 on the ground that there was a difference between the value of the land shown in the sale deed and the stamp value. The order of revision was upheld by the Tribunal. On appeal, High Court held that there was nothing on record to indicate what was the price of the land at the relevant time. Even otherwise, it was a pure question of fact. Apart from the fact that the price of the land was different from that recited in the sale deed unless it was established on record by the Department that as a matter of fact, the consideration as alleged by the Department did pass to the seller from the purchaser, it could not be said that the Department had any right to make any additions. The addition was not justified. (R/TA. No. 399 of 2019 dt 20-08-2019) (AY. 2011-12)

Gayatri Enterprise v. ITO (2020) 420 ITR 15 (Guj) (HC)

39. 69C : Unexplained expenditure – Bogus purchases – Accommodation entries – Restricting the disallowances at 5% of alleged bogus purchases is held to be justified – Entire purchases cannot be disallowed [S. 37(1)n, 144]

The assessee is engaged in the business of manufacturing and dealership of all kinds of industrial power controlling instrument cables and related items. On the basis of the information received from the sales tax department the AO disallowed the entire purchases from the alleged hawala bill givers and passed the order u/s. 144 of the Act. On appeal considering the additional evidences added only 2% of the profit element on alleged purchases. On appeal by the revenue the Tribunal directed the AO to make further disallowance of 3% alleged purchases. Against the order of the Tribunal the revenue filed an appeal to the High Court. Followed, CIT v. Bholanath Polyfab Ltd. (2013), 355 ITR 290 (Guj) (HC) and distinguished the ratio in Kaveri Rice Mills v. CIT (2006)157 Taxman 376 (All) (HC), CIT v. La Medica (2001) 250 ITR 575 (Delhi) (HC) (Arising from ITA No. 7773/Mum/2014 dt. 3-11-2016 (ITA No. 1330 of 2017 dt 20-02-2020 (AY. 2010-11).

PCIT v. Rishabhdev Tachnocable Ltd. (Bom) (HC). www.itatonline. org

40. 69C : Unexplained expenditure – Bogus purchases – Business of Civil Contractor – Even if the purchases made by the assessee are to be treated as bogus, it does not mean that entire amount can be disallowed – As the AO did not dispute the consumption of the raw materials and completion of work, only a percentage of net profit on total turnover can be estimated [S. 37(1), 68]

The Respondent-Assessee carried on business as a Civil Contractor. The assessment was reopened under Section 147 of the Income Tax Act. Information was received from the Sales Tax Department that Respondent-Assessee had taken bogus purchase entries of ₹ 1,69,48,368/- from the different parties. The reassessment order was accordingly passed on 17 February, 2014 determining the total income of ₹ 2,18,13,430/. On appeal CIT (A) who partly allowed the Appeal and sustained addition of based on the net profit @ 5.76 % on the contracted amount. On appeal by the revenue the Tribunal affirmed the order of the CIT(A). dismissing the appeal of the revenue the Court held that, even if the purchases made by the assessee are to be treated as bogus, it does not mean that entire amount can be disallowed- As the AO did not dispute the consumption of the raw materials and completion of work, only a percentage of net profit on total turnover can be estimated. Court also held that assuming that the Respondent – Assessee the purchasers from whom the purchases were made were bogus, in view of the finding of fact that the material was consumed, the question would be of extending the percentage of net profit on total turnover. This would be a matter of calculations by the concerned authority. In this context, if the CIT (A) and the Tribunal chose to follow the percentage arrived by the Settlement Commission in the Respondent-Assessee’s own case for the other years, this exercise cannot be considered as irregular or illegal. Followed PCIT v. Mohommad Haji Adam & Co (Bom) (HC) www. itatonline.org, PCIT v. Paramshakti Distributors Pvt. Ltd. (Bom) (HC) www.itatonline.org. (ITA No. 1453 of 2017 dt. 8-1-2020) (AY. 2019-10)

PCIT v. Pinaki D. Panani (Bom) (HC) www.itatonline. org

41. 69C : Unexplained expenditure – Income from undisclosed sources – Bogus purchases – Bhanvarlal Jain group – Hawala concern – Addition cannot be made of entire purchases based on the report of Investigation wing – When sales are accepted purchases cannot be rejected – Estimate of profit of 3% of bogus purchases – Held to be justified – Appeal of revenue is dismissed – No question of law [S.260A]

The responded is in business in trading and manufacturing of silver, gold, diamonds stones and Jewellery. The AO on the basis of report of investigation wing Mumbai where in two purchases were made from Amit Diamonds which belongs to Bhanvarlal Jain group being a hawala concern, made addition of entire purchases. CIT(A) deleted the addition and confirmed 3% of amount of purchases. Tribunal affirmed the order of the CIT(A). On appeal by the revenue, dismissing the appeal of the revenue the Court held that the CIT(A) had found that the assessee had shown purchases as well as sales. If the sales were accepted, the Assessing Officer could not have rejected the purchases. Once the purchases were accepted, the difference between the inflated and actual price of purchases would be required to be disallowed and what would be the extent of difference would be a matter of estimate. The Commissioner (Appeals) had estimated this difference at 3 per cent of the bogus purchases and the Tribunal had accepted it. Whether an estimate should be at a particular sum or at a different sum can never be an issue of law. (Followed Sanjay Oilcake Industries v. CIT (2009) 316 ITR 274 (Guj)(HC) Referred N. K. Industries Ltd. v. Dy CIT (2017) 292 CTR 354/ 8 ITR-OL 336 (Guj) (HC), Vijay Proteins Ltd. v. CIT (2015) 58 taxmann.com 44 (Guj) (HC) (AY. 2011-12)

PCIT v. Shah Virchand Govanji Jewellers Pvt. Ltd. (2019] 418 ITR 472 (Guj) (HC)

42. 80 : Return for losses – Claim for carry forward of loss – Return filed in old form – Filed revised form after due date – Entitle to carry forward the loss [S. 139(1), 139 (3)]

Assessee had filed its return on 31-10-2007, in old Form, its claim for carry forward of loss could not be allowed. New form was filed on 23-12-2008 i.e., beyond due date of filing of return. AO disallowed the claim for carry forward of loss. Tribunal allowed the claim of the assessee. On appeal by the revenue, High Court affirmed the view of the Tribunal. Court held that the assessee had not sought to gain any unfair advantage by filing return in old Form and moreover, it did later on comply with conditions of filing new Form. (AY. 2007-08)

CIT v. Zila Sahkari Bank (P.) Ltd. (2019) 112 taxmann.com 403/ 269 Taxman 56 (All) (HC).

Editorial : SLP of revenue is dismissed; CIT v. Zila Sahkari Bank (P.) Ltd. (2020) 269 Taxman 55 (SC)

43. 80IB(10) : Housing projects –Completion of project – Partial construction of project – Eligible for exemption

Question raised before the High Court by the revenue was “Whether on the facts and in the circumstances of the case and in law, the ITAT has erred in holding that the project was complete on or before 31-03-2009 when occupation certificate was accorded only in respect of 9206.30 sq. mtr. against sanction of 11960.15 sq. mtr. ?”

Following the order of High Court in assessee’s own case bearing ITA No. 655 of 2017 dt 6-6-2019 for the AY. 2009-10 the question raised is decided against the revenue and in favour of the assessee. (ITA No. 2099/Mum/ 2015 dt 15-12-2016) (ITA No. 1755 of 2017 dt. 22-01-2020 (AY.2010-11)

PCIT v. Sadhana Builders Pvt. Ltd. (Bom) (HC) (UR)

44. 80IB(10) : Housing projects – One of the unit constructed exceeded the upper limit – Deduction cannot be denied to entire housing projects – Exemption is not allowable only in respect of the unit exceeded the prescribed limits

Assessee claimed deduction under S. 80-IB(10) in relation to income of housing development. AO rejected assessee’s claim on ground that some residential units exceeded specified built up area of 1500 sq. ft. Tribunal held that simply because out of several units included in housing project, only in one of them, constructed area exceeded upper limit; that too, by a small margin, deduction claimed could not be denied in respect of entire housing project. High Court confirmed order passed by Tribunal.

PCIT v. Shreenath Buildcon (2019) 110 taxmann.com 389 (Guj) (HC)

Editorial : SLP of revenue is dismissed; PCIT v. Shreenath Buildcon. (2019) 267 taxman 115 (SC)

45. 90: Double taxation agreement – Rate of tax Applicable to domestic company and not 65% – CBDT Circular is held to be applicable – DTAA – India-Japan [Arts. 7, 23, 24(2)]

The question before the High Court was “Whether on the facts and in the circumstances of the case, the tribunal was right in law in holding that the rate of tax applicable to the assessee would be the rate of 65% as held by the Tribunal to be applicable to assessee and not the rate applicable to a domestic company” After considering the various provisions of the DTAA the Court held that the stand taken in the Tribunal’s order cannot be appreciated or accepted since a similar clause in the double taxation avoidance agreement between India and the Netherlands was interpreted by the Central Board for Direct Taxes and a circular issued thereupon. The Tribunal held, in the present case, that since there was no similar circular, the benefit as available to a permanent establishment of ABN Amro Bank in India could not be extended to this assessee. When there is no dispute that there is a double taxation avoidance agreement in place between India and the country of origin of the assessee in the present case and when such agreement contains a lucid clause as apparent from Article 24(2) thereof quoted above and when Section 90 of the Act itself recognises such an agreement and creates a special status for the relevant permanent establishments, there was no room for either the Commissioner to wait for any dictat from the high command of the CBDT or for the Tribunal to demonstrate similar servile conduct in not appropriately interpreting and giving effect to the clear words of the agreement between the two countries. The reference is concluded by answering the first question raised as follows: The Tribunal was incorrect in holding that the rate of tax applicable to the assessee was 65%. The Tribunal ought to have held that the rate applicable to the assessee was such rate as applicable to a domestic company carrying on similar activities. (AY. 1991-92)

Bank of Tokyo Mitsubishi Ltd. v. CIT (2019) 310 CTR 479/ 181 DTR 220 (Cal) (HC)

46. 139 : Return of income – Delay in filing revised return – Amalgamation – Sanction of company Law Tribunal is not binding on Income-Tax Authorities – Application for condonation of delay to me made [S. 119, Companies Act, 2013, S. 230(5), Constitution, Art. 226]

Pursuant to sanction of the scheme of arrangement the transferee company attempted to file revised returns without filing an application for condonation of the delay in filing them on the basis that the sanctioned scheme of arrangement and, in particular, clause 64(c) thereof, entitled such filing and was binding on the Income-tax authorities. This contention was accepted by a single judge under article 226 of the Constitution. On appeal, the Court held that the Department had been notified that the scheme of arrangement enabled the amalgamated company and transferee company to file returns and revised returns before the tax authorities, including the Income-tax authority. However, it could not be said that the Department had consented to waive the procedures or statutory requirements prescribed in the Income-tax Act for this purpose. In this regard, the order of the Company Law Tribunal whereby the scheme of arrangement was sanctioned also mandated that necessary permissions should be obtained and compliances fulfilled. The transferee company was required to comply with the procedure for filing a revised return belatedly. (AY. 2015-16, 2016-17)

ACIT v. Dalmia Power Ltd. (2019) 418 ITR 242 (Mad) (HC)

ACIT v. Dalmia Cement Power Ltd. (2019) 418 ITR 242 (Mad) (HC)

Editorial : Decision in Dalmia Power Ltd. (2019) 418 ITR 221 / 308 CTR 777/ 178 DTR 113/ 265 Taxman 37 (Mad) (HC) is reversed.

47. 143(2) : Assessment – Notice – Mandatory – Block assessment – Non issue of notice – Assessment is held to be bad in law [S.132, 158BC]

Dismissing the appeal of the revenue the Court held that the assessment made by the AO without issuing the mandatory notice u/s. 143(2) of the Act is held to be bad in law.

CIT v. Sodder Builder And Developers (P.) Ltd. (2019)419 ITR 436 (Bom) (HC)

48. 143(2) : Assessment – Notice – Limitation – Notice was not issued within prescribed time – Order is barred by limitation [S.143(3)]

Dismissing the appeal of the revenue the Court held that on the admitted fact situation the notice under S. 143(2) of the Act, was not given within prescribed time, and the Tribunal was justified in law in quashing the draft assessment order in pursuance of the notice under S. 143(2) holding the notice was barred by limitation. (AY. 2010-11)

CIT(IT) v. Cameron Singapore Pte. Ltd. (2019) 418 ITR 272 (Raj)(HC)

Editorial : Order in Cameron Singapore Pte. Ltd. v. Asst. DIT(IT) (2017) 58 ITR 202 (Trib) (Jaipur) is affirmed.

49. 143(2) : Assessment – Notice under S. 143(2) of the Income Tax Act was never issued to the Assessee before initiating of proceedings under Section 158 BC of the Income Tax Act – Order is held to be bad in law [S. 158BB, 158BC, 260A]

Tribunal decided the quantum addition in favour of the assessee. In the cross objection the assessee raised the issue of non servicing the issue of notice u/s. 143(2) of the Act, though the ITAT has not given a finding against the assessee on the issue of notice u/s. 143(2) of the Act. Substantial question of law is raised at the time of final hearing of the appeal though it was not raised at the time of admission of appeal. Substantial question of law is admitted on following question of law “Whether non-issuance of notice under Section 143(2) of the Income Tax Act, 1961 vitiates that assessment proceedings under Section 158 BC of the Income Tax Act in view of the Judgment of the Hon’ble Supreme Court in ACIT v. Hotel Blue Moon 2010 3SCC 259?”

Following the ratio of Apex Court in ACIT v. Hotel Blue Moon, the Court held that the omission on the part of the Assessing Authority to issue notice under Section 143(2)cannot be regarded as a procedural irregularity and the same is not curable and such requirement cannot be dispensed with. Hon’ble Apex Court has held that even for the purpose of Chapter XIV-B of the Income Tax Act for determining of undisclosed income for block assessment in proceedings under Section 158BC, provisions of Section 142, 143(2) and 143(3) are applicable and no assessment can be made without issuing notice under Section 142 of the said Act. Accordingly the order is held to be bad in law. (TA No. 75 of 2008 /Misc A No. 179 of 2016 dt. 13-09-2019)

CIT v. Fomento Fianance & Investment (P) Ltd (2019) 183 DTR 340/ (2020) 312 CTR 88/ 421 ITR 146 (Bom) (HC)

50. 143(3) : Assessment – E-Assessment – Post demonetization – The AO should at least call for an explanation in writing before proceeding to conclude that the amount collected by the assessee was unusual – The AO could have come to a definite conclusion on facts after fully understanding the nature of business of the assessee – Order of AO is set aside and the AO is directed to dispose the matter within sixty days of receipt of the order. [S.69A, 115BBE.]

The petitioner has challenged the order passed by the respondent on 27-12-2019 in respect of the amount received by the petitioner post demonetization i.e., between 09-11-2016 and 31-12-2016. the petitioner has prima facie demonstrated that the assessment proceeding has resulted in distorted conclusion on facts that amount collected by the petitioner during the period was huge and remained unexplained by the petitioner and therefore same was liable to be treated as unaccounted money in the hands of the petitioner under S. 69A of the Act. Therefore, the impugned order making the petitioner liable to tax at the maximum marginal rate of tax by invoking S. 115BBE of the Act. Court held that while E-Assessment without human interaction is laudable, such proceedings can lead to erroneous assessment if officers are not able to understand the transactions and accounts of an assessee without a personal hearing. Assessment proceeding under the changed scenario would require proper determination of facts by proper exchange and flow of correspondence between the assessee and the AO. The AO should at least call for an explanation in writing before proceeding to conclude that the amount collected by the assessee was unusual. Also, since the assessment proceedings no longer involve human interaction and is based on records alone, the assessment proceeding should have commenced much earlier so that before passing assessment order, the AO could have come to a definite conclusion on facts after fully understanding the nature of business of the assessee. AO is directed to dispose the matter within sixty days of receipt of the order. (W.P. No. 1732 of 2020 and W.M.P. Nos. 2006 & 2007 of 2020, dt. 04-02-2020)
(AY. 2-17-18)

Salem Sree Ramavilas Chit Company v. DCIT(2020) 114 taxmann.com 492 (Mad)(HC), www.itatonline.org

51. 143(3) : Assessment – Remand by the Tribunal – Additional claim could be made in remand proceedings – Order of tribunal is set aside [S. 144, 254(1)]

The AO made the assessment u/s. 144 of the Act. The Tribunal set aside the matter to the AO for framing a fresh assessment. The AO passed the oder u/s 143(3) r.w.s 254 of the Act by making certain additions and disallowances. Order of the AO is upheld by the CIT(A). On appeal the Tribunal once again set aside the order of the CIT(A) and directed the AO to pass fresh order. The AO deleted the addition made in the first two rounds. The Assessee made afresh claim as regards the non taxability of income as regards write off liability by Canara Bank which was earlier offered as taxable income. The AO rejected the claim on the ground that in remand proceedings the assessee could not raise a fresh claim. CIT(A) also confirmed the order of the AO. Tribunal also affirmed the order of the CIT(A). On appeal the High Court held that the Tribunal has not appreciated the scope and nature of the remand ordered by the it by its earlier order dt. 10-03-2011. Accordingly the Court allowed the assessee to raise the claim and restored the matter back to the AO for evaluation of the said claim on its own merits. (AP. No. 259 of 2018 dt 28-11-2019) (AY. 2002-03)

Curewel (India Ltd v. ITO (2020) CTCJ – January-P. 87 (Delhi) (HC)

52. 145 : Method of accounting –Accommodation entries – Estimate of commission – Rejection of accounts and estimate of income – Discretion must be exercised in a judicious manner – Tribunal is not justified in confirming the addition [S.144, 145(3)]

The AO estimated 10 per cent commission for providing accommodation entries to the tune of ₹ 12,00,02,100. The CIT(A) took the view that the estimation of commission at 10 per cent by the Assessing Officer is one-third of the benefit, which could be termed as excessive and not a reasonable estimate. The CIT(A) without there being anything on record, thought it fit to take the view that the estimate by the assessee at 3 per cent translated to 1 per cent of the benefit derived, which could be termed too low, and in such circumstances, estimated it at 2 per cent, which would translate to about 6.7 per cent of the benefit alleged to have been derived by PACL India Ltd. Tribunal confirmed the addition. On appeal the High Court held that this was nothing but pure guesswork without there being any material or basis for arriving at the same. The Tribunal was not right in law in confirming the addition. (AY. 2011-12)

Rameshchandra Rangildas Mehta, Prop. of M/s. Sunit Trading Company v. ITO (2020) 421 ITR 109 (Guj)(HC)

53. 145 : Method of accounting – Real estate developer – Project completion method – Addition on the basis of percentage completion method is held to be not justified [AS-7]

Assessee is engaged in business of construction as a builder /real estate developer. It maintained books of account on basis of project completion method. AO made certain addition to assessee’s income by applying percentage completion method. Tribunal held that project completion method followed by assessee would not result in deferment of payment of taxes which were to be assessed annually under Act. Moreover, AS-7 issued by ICAI also recognized position that in case of construction contracts, assessee could follow either project completion method or percentage completion method. Tribunal further opined that there was no jurisdiction on part of AO to adopt percentage completion method for one year on selective basis. Accordingly the Tribunal deleted the addition. On appeal by the revenue the High Court affirmed the order of the Tribunal.

PCIT v. Panchsheel Colonizers (P.) Ltd. (2019) 267 Taxman 571/ 111 taxmann.com 459 (Raj) (HC)

Editorial : SLP is granted to the revenue, PCIT v. Panchsheel Colonizers (P.) Ltd. (2019) 267 Taxman 570 (SC)

54. 145 : Method of accounting – Suppression of sales – Revenue was not able to show any defect in assessee’s records or in books of account maintained by assessee – Rejection of books of account is held to be not justified – Deletion of addition on account of suppression of addition is held to be justified [S 43CA, 50C, 145(3)]

The assessee was engaged in the business of property development. During year, the assessee sold several flats and received sale consideration. The AO held that the income on the sale of flats was available to tax in the assessment year 2004-05 and not in the assessment year 2005-06 on the basis that the project was completed in the previous year relevant to the assessment year 2004-05 and not assessment year 2005-06. However, the income offered by assessee for the assessment year 2005-06 was assessed on protective basis. Further, he found that there was suppression of sales value in respect of six flats. Thus, he made an addition on account of suppressed sales value in respect of six flats. CIT(A) partly allowed the assessee’s appeal holding that the project was completed in the assessment year 2005-06 and not in the assessment year 2004-05. However, he rejected the books of account under S. 145(3) and completed the assessment on best judgment basis. CIT (A) held that there was an understatement of sales value in respect of all twelve flats as there was suppression of value in all the twelve flats of the project, as the market rate then was ₹ 8,992 per sq. ft. for the assessment year 2005-06. Thus, the above rate of ₹ 8,992 per sq. ft. was applied to all the twelve flats to enhance the assessment to certain amount. On appeal Tribunal set aside the order of CIT (A) and held that neither the AO nor the CIT(A) had any material on record to show that the assessee received more than what was shown in the sale-deeds. Moreover, it held that there was no occasion to apply section 145(3) so as to reject the books in the absence of any defect in the books on account of being found. Thus, it deleted the enhancement of assessment. On appeal by the revenue, High Court affirmed the order of the Tribunal and also held that, provision introduced with effect from 1-4-2014 for deeming consideration received on sale of goods/assets on basis of stamp duty valuation would be applicable prospectively. (AY. 2005-06)

PCIT v. Swananda Properties (P.) Ltd. (2019) 267 Taxman 429 (Bom.)(HC)

55. 147 : Reassessment – After the expiry of four years – Change of opinion – Interest income on fixed deposit assessed as business income – Reassessment on the ground that it has to be assessed as income from other sources.
    [S. 56, 148, Art. 226]

Assessee, in return of income claimed interest income earned on fixed deposit as part of its business income and AO disallowed same on ground that it did not carry out any business during year and passed assessment order under S. 143(3) on 30-03-2014 and subsequently AO issued reopening notice dated 26-03-2018 on ground that interest income was required to be taxed as income from other sources. On writ the Court held that notice was issued beyond period of four years from end of assessment year 2011-12 and there had been a complete disclosure of all material facts on part of assessee during regular assessment proceedings under S. 143(3), impugned notice was clearly hit by first proviso to section 147 and deserved to be set aside. (AY. 2011-12)

DCIT v. MSEB Holding Co. Ltd. (2019) 102 taxmann.com 288 (Bom) (HC)

Editorial : SLP of revenue is dismissed, since tax effect is less than ₹ 2 Crore. DCIT v. MSEB Holding Co. Ltd. (2020) 269 Taxman 22 (SC)

56. 147 : Reassessment – After the expiry of four years – Without there being any element of lack of true and full disclosure on the part of the assessee – Reassessment notice is held to be bad in law [S. 115-0, 148]

The reassessment notice was issued on the ground that the assessee has resorted to dubious method of buyback of shares to avoid dividend tax. Thus the transaction is a colorable device to avoid tax and it clearly amounts to tax evasion. The assessee company has utilized the accumulated profit for buy back of the shares and this arrangement is a convenient ploy to get round the dividend distribution tax liability and the payment towards buyback was indeed divided. By not paying the dividend, the company has avoided DDT. Instead of paying dividend, the company has offered a buyback offer which is accepted by the holding company and therefore I have reason to believe that the income of
₹ 11,04,29,642/- chargeable to tax has been under assessed. On writ allowing the petition the Court held that issue of notice after expiry of four years, without there being any element of lack of true and full disclosure on the part of the assessee – Reassessment notice is held to be bad in law. (AY. 2011-12)

Firstsource Solutions Ltd. v. Dy. CIT (2019) 176 DTR 151 (Bom) (HC)

57. 147 : Reassessment – After the expiry of four years – Bogus purchases – Accommodation entries – No failure to disclose material facts – Change of opinion – Reassessment is held to be bad in law [S. 69C, 148]

The petitioner is a partnership firm carrying on the business of manufacture and exports of diamonds. The assessment was completed u/s. 143(3) and thereafter reopening was done for alleged bogus purchases. The assessment was done by making GP additions. Thereafter the reassessment notice was issued again for alleged accommodation entries. On writ allowing the petition the Court held that the omission of the AO to make an assertion in the reasons that there was a failure to disclose fully and truly all material facts necessary for the assessment is sufficient to set aside the reassessment notice. Also, a notice issued on change of opinion is bad in law. (WP No. 2506 of 2019, dt. 12-12-2019) (AY. 2012-13)

Usha Exports v. ACIT (2020) 312 CTR 237/ 185 DTR 87 (Bom)(HC), www.itatonline.org

58. 147 : Reassessment – Within four years – Change of opinion- Netting of interest earned and paid on borrowed capital – No new material – Notice for reassessment is held to be not valid [S.148, Art. 226]

Allowing the petition, the Court held that the entire question of taxing the assessee’s interest had been minutely scrutinised by the AO during the original assessment proceedings. The AO had asked the assessee to explain why certain interest earned was not offered to tax and the assessee had produced full details of the interest earned and the interest paid on the borrowed capital and had clarified that it had netted the interest received against the interest paid and had transferred the remaining amount to the work-in-progress account. In the absence of new material, reopening of the assessment under S 147 would be based on a mere change of opinion. The notice issued under S. 148 was to be set aside. (AY. 2013-14)

Rubix Trading Pvt. Ltd. v. ITO (2020) 421 ITR 330 (Bom) (HC)

Editorial : SLP of revenue is dismissed. ITO v. Rubix Trading Pvt. Ltd. (2019) 416 ITR 136 (St) (SC)

59. 147 : Reassessment – Fishing enquiry – Information from intelligence wing – Builder – Make detailed enquiry – Reassessment is held to be bad in law. [S. 28(i), 148, Art. 226]

The assessee is builder. The assessment was completed u/s. 143(3) Subsequently AO reopened the assessment on the ground that record of assessee was checked and it was found that it was a builder and, therefore, to verify intelligence gathered by Intelligence Wing, it was necessary to carry out detailed inquiry, and the assessee had developed society land which according to information received did not contain any agreement. Assessee repeatedly pointed out to AO that it had neither developed any such project nor claimed exempt income arising out of such project. AO rejected the objection filed by the assessee. On writ the Court held that from reasons recorded it was very clear that AO wished to carry out a fishing inquiry. Accordingly the reopening of assessment could not be permitted for carrying out fishing inquiries. (AY. 2011-12)

Giriraj Enterprises v. ACIT (2019) 174 DTR 409 /102 taxmann.com 188 (Bom) (HC)

60. 147 : Reassessment – Agricultural income – Advisory issued by the department – Verify the income – Undisclosed income – No tangible material – Reassessment is held to be bad in law [S.2(IA), 148, Art. 226]

Assessee filed its return of income showing agricultural income of certain amount which was accepted. On the basis of an advisory issued by department the AO was directed to thoroughly verify claims in respect of agricultural income earned by several parties including assessee. On basis of same, AO issued notice u/s 148 against assessee so as to treat its agricultural income as income from undisclosed sources. On writ the revenue admitted that the advisory contained in a letter which was issued in light of an order passed by this Court on a public interest litigation and required verification of agricultural income for certain period, which also included assessment year in question. Advisory directed AO to verify whether there was any data entry error in returns filed; to provide feedback where assessment was complete and in cases where assessment was pending, to thoroughly verify claims on agricultural income. Allowing the petition the Court held that reopening was simply founded on advisory issued by department and there was no tangible material in possession of AO for formation of belief about escarpment of income chargeable to tax, therefore reopening notice was unjustified. (AY. 2011-12)

Ravindra Kumar (HUF) @ Rabindra Kumar (HUF) v. CIT (2019) 266 Taxman 506 (Patna) (HC)

61. 148 : Reassessment – Notice – Notice sent at address available in PAN database returned – Communication had to be delivered at address of assessee available with banking company – No service of reopening notice – Order making additions unjustified [S. 147, 282, R, 127, Art. 226]

Assessee never filed return of income as she did not have any taxable income. AO issued reopening notice which was dispatched for delivery through post. The postal authorities returned the notice with a remark ‘left’. AO did not take any further steps and carried on assessment and made additions to assessee’s income. High Court held that where delivery of notice could not be made at address of assessee available in PAN database, communication had to be delivered at address available with banking companies. Service of notice was not complete inspite of department having access to assessee’s bank account. Hence, impugned reassessment order making additions to income of the assessee was unjustified and impugned notice and order are set aside. (AY. 2011-12)

Harjeet Surajprakash Girotra v. UOI (2019) 180 DTR 257 /266 Taxman 29 (Bom.) (HC)

62. 148 : Reassessment – Notice – Issue of notice prior to recording of reasons for reopening of assessment is held to be without jurisdiction – Deserves to be quashed – Defects could not be cured by invoking S. 292B of the Act [S. 147, 292B]

Dismissing the appeal of the revenue the Court held that issue of notice u/s. 148 without recording reasons for same, it was not a mere case of clerical error, but substantial condition for valid issue of reopening notice had not been fulfilled and, such a defect could not be cured by invoking provisions of S. 292B of the Act. (AY. 2004-05)

PCIT v. Tata Sons Ltd. (2019) 267 Taxman 13 (Bom) (HC)

63. 151 : Reassessment- Sanction for issue of notice – Joint Commissioner of Income tax – Reopening of assessment with the approval of Commissioner is held to be not valid [Ss.147, 148, 151(2)]

Dismissing the appeal of the revenue, the Court held that, where the Act provides for sanction by the Joint Commissioner of Income tax in terms of S.151, then the sanction by the Commissioner of Income tax would not meet the requirement of the Act and reopening notice would be without jurisdiction. Followed Ghanshyam K. Khabarani v. ACIT (2012) 346 ITR 443 (Bom) (HC). (ITA No. 371 /Lkw/2016 dt 19-10-2016) (AY. 2008-09) (ITA No. 1035 of 2017 dt. 11-11-2019)

PCIT v. Khushbu Induatries (2019) BCAJ- January-P. 47 (Bom) (HC)

64. 153A : Assessment – Search – Abated assessment – It is open to both parties, i.e. the assessee and revenue, to make claims for allowance or disallowance [S. 132, 139(1)]

Dismissing the appeal of the revenue the Court held that, once the assessment gets abated, the original return filed u/s. 139(1) is replaced by the return filed u/s. 153A. It is open to both parties, i.e. the assessee and revenue, to make claims for allowance or disallowance. The assessee is entitled to lodge a new claim for deduction etc. which remained to be claimed in his earlier/ regular return of income (CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom)(HC), referred) ITA No. 1934 of 2017, dt. 05-02-2020) (AY. 2008-09)

PCIT v. JSW Steel Ltd. (Bom)(HC), www.itatonline.org

65. 194C : Deduction at source – Contractors – Failure to file TDS related documents at the time of filing of return of TDS – Procedural law – Fine can be imposed – Expenses cannot be disallowed – Matter remanded to the AO for readjudication [Ss. 40(a)(ia), 194C(6), 194C(7), 254(2), 260A]

The AO disallowed the expenses on the ground that the assesee has failed to file TDS related documents at the time of filing of return of TDS. Order of the AO is upheld by the Tribunal. On appeal High Court held that sub-section (6) of section 194C is the provision which grants benefit to the assessee. This benefit comes with the condition of compliance of sub-section (7) of section 194C, which is the procedure to be followed. Even assuming that the assessee had not furnished the particulars as required under sub-section (7) of section 194C in the prescribed form, the maximum that could be done is to impose a fine of ₹ 200 for every day of such non-compliance. Therefore, this procedural law, as prescribed under sub-section (7) of section 194C cannot takeaway the benefit, which will accrue to the assessee under sub-section (7) of section 194C. For the above reasons, the matter is to be remanded to the AO for a fresh consideration. Followed, CIT v. Sri Parameswari Spinning Mills (P.) Ltd. (2019) 108 taxmann.com 386 (Mad) (HC) referred ACIT v. Arihant Trading Co (.) 176 ITD 397 (Jaipur) (Trib). (AY. 2012-13)

Dilip Kumar. v. ACIT (2020) 269 Taxman 93 (Mad) (HC)

66. 194C : Deduction at source – Contractors – Contract for sale of goods – Agreement for bulk sale of advertising space – Provision is not applicable

Allowing the appeal of the assessee the Court held that the S. 194C of the Act, would apply to a contract for work and not to a contract of sale. There is a distinction between the two concepts namely “contract for sale of goods” and “works contract”. In determining the question whether a contract constitutes one for work or is a contract of sale, the intention and object of parties has to be borne in mind, which is to be examined in the light of terms of the contract. The main object in a contract of sale is the transfer of property and delivery of possession of the property, whereas the main object in a contract for work is not the transfer of the property, but it is one for work and labour. On facts the assessee had entered into an agreement for bulk sale of advertising space with its holding company on a principal to principal basis by transfer of rights therein. The assessee under the agreement made purchase of advertisement space and exercised control over such space with the right to either sell it to another or retain it for itself. Thus, it was a transfer of advertising space to the assessee who in turn sold it to others. Therefore, the transaction could not be termed a contract for work, and S. 194C was not applicable. (AY. 2007-08)

Times VPL Ltd. v. CIT (2020) 421 ITR 170/ 312 CTR 284/185 DTR 139 (Karn) (HC)

67. 194H : Deduction at source – Commission or brokerage – Bank credit card payment – Not liable to deduct tax at source – Lounce charges are covered u/s 194C and not u/s 194I of the Act [S. 40(a)(ia), 194I]

Questions raised before the High Court was the were :

(a) ”Whether, on the facts and in the circumstances of the case and in law, the Hon’ble ITAT was justified in upholding the order of the CIT (A) and holding that the amount retained by a bank/credit card agency out of the sale consideration of the tickets booked through credit cards is not covered under the definition of “commission or brokerage” given in the Explanation (i) to section 194H of the Act and the assessee was not liable to deduct tax at source under section 194H in respect of this amount?”

(b) “Whether, on the facts and in the circumstances of the case and in law, the Hon’ble ITAT was justified in holding that the use of lounge premises paid by the assessee were payments for contract of work under section 194C of the I.T. Act and not in the nature of rent as per section 194-I of the I.T. Act”

Following the ratio in CIT v. JDS Apparsal Ltd. (2015) 370 ITR 454 (Delhi) (HC) first question is answered in favour of the assessee. As regards question no (b) Following the Japan Airlines Company Ltd. (2015) 377 ITR 372 (SC) has overruled such decision of Delhi High Court. Supreme Court approved the view of Madras High Court in case of CIT v. Singapore Airlines Ltd (2013) 358 ITR 237 (Mad) (HC). (AY. 2009-10)

CIT v. Jet Airways India Ltd. (2019) 180 DTR 115 (Bom) (HC)

68. 194C : Deduction at source – Contractors advertisement services – Principle of natural justice must be followed – Assessing Officer is not justified in deciding that tax should be deducted under Section 194J without giving an opportunity of hearing. [S.194J, 201(1) 201(IA), Art. 226]

The assessee is an advertising and media agency, engaged in the business of advertising by creative and production work, media planning and incidental activities. The assessee deducted the tax as per S. 194C of the Act. According to the revenue tax should have been deducted as per S. 194J of the Act as the rate applicable to professional or technical services. The Income-tax Officer (TDS) passed orders under section 201(1)/(1A) and held that the assessee had short tax deducted/not deducted tax at source to the tune of ₹ 91.10 crore during the assessment years. On a writ petition to quash the order the Court held that the orders could not survive the test of following the principles of natural justice. The Income-tax Officer (TDS) had collected extensive material, which was attributable to his own research, but never put such material to the assessee for its comments and most importantly his entire orders were founded on such research material. The orders were not valid. Accordingly the order was quashed. (AY. 2017-2018)

TLG India Pvt. Ltd. v. ITO (TDS) (2019) 418 ITR 324 (Bom)(HC)

69. 194H : Deduction at source – Commission or brokerage – Guarantee commission paid to bank is not covered under commission or brokerage – Not liable to deduct tax at source. [Ss. 201(1) 201(IA)]

Dismissing the appeal of the revenue the Court held that payment of guarantee commission made by assessee to banks was not covered under commission or brokerage as defined under S. 194H of the Act. Followed CIT v. Larsen & Toubro Ltd. (2019) 260 Taxman 271 (Bom) (HC).

CIT v. Nimbus Communications Ltd. (2019) 266 Taxman 376 (Bom) (HC)

Editorial : SLP of revenue is dismissed; CIT v. Nimbus Communications Ltd. (2019) 266 Taxman 375 (SC)

70. 199 : Deduction at source – Credit for tax deducted – Mismatch of TDS figures – Failure of deductor to upload the correct details in Form No. 26A – Benefit of tax deducted at source should be given to the assessee on the basis of evidence produced before the revenue authorities [S. 205, Form 26A]

In the assessment proceedings the revenue objected to assessee’s claim of Tax Deducted at Source from payments made on ground that there was mis-match in TDS certificate issued by deductors and aggregate amounts arrived at as appearing in Form 26-A. On appeal Tribunal held that though in case, deductor failed to upload correct details in Form 26-A, benefit of TDS should be given to assessee on basis of evidence produced before Department. Accordingly Tribunal directed the AO to verify correct facts and give credit of TDS to assessee. Tribunal relied on Yashpal Sahni v. Rekha Hajarnvis, Asstt CIT (2007) 165 Taxman 44 / 293 ITR 539 / 211 CTR 1 (Bom) (HC). On appeal by the Revenue High Court dismissed the appeal of the revenue.

PCIT v. Tata Communications Ltd. (2019) 267 Taxman 498 / 111 taxmann.com 258 (HC)

Editorial: SLP of revenue is dismissed; PCIT v. Tata Communications Ltd. (2019) 267 Taxman 497 (SC)

71. 201 : Deduction at source – Failure to deduct or pay – Natural justice violated-The order of revenue must speak for itself and cannot be improved upon by an affidavit-in-reply filed by assessee, its not permitted- Orders of revenue were set aside – Matter restored to revenue for fresh disposal of show cause notice after following principles of natural justice i.e. due consideration of assessee submission by speaking order [Ss. 40(a)(ia), 194C, 194J, 197, 201(1), 201 (IA), Art. 226]

Assessee, advertising agency, recovers amount from its clients and makes payment to media owners for advertisement of its clients, on its media. While making payment, Assessee’s clients deduct tax at source u/s. 194C and assessee again deducts tax at source u/s. 194C while making payment to media owners. Show-cause notices were issued as to why it should not be treated as assessee in default u/s 201(1) and 201(1A) for failure to deduct tax on payments u/s. 194J and failure to deduct tax on provisions for expenses, which was disallowed u/s. 40(a)(ia) of the Act. Assessee filed the reply, however the AO held that assessee in default u/s 201(1) and 201 (1A) of the Act. On writ the Court held that when assessee filed representation in respect of proceedings u/s. 201 and 201(1A), revenue was in undue haste passed an order determining huge sums payable by assessee for failure to appropriately deduct tax. This entire exercise was done in undue haste as Revenue was obliged to issue tax deduction certificate u/s. 197. It was only on determination of assessee’s tax liability, could revenue reduce amount of tax to be deducted by assessee’s customers while making payment. Court held that the entire proceedings leading to orders were vitiated for breach of natural justice. Orders of revenue were set aside. The Court also observed that the order of revenue must speak for itself and cannot be improved upon by an affidavit-in-reply filed by assessee, its not permitted. Matter restored to revenue for fresh disposal of show cause notice after following principles of natural justice i.e. due consideration of assessee submission by speaking order. (AY. 2017-18, 2018-19, 2019-20)

TIG India Pvt. Ltd. v. DCIT (2019) 184 DTR 349 / (2020) 312 CTR 199 (Bom) (HC)

72. 220 : Collection and recovery – Assessee deemed in default – Pendency of appeal before CIT(A) and condonation of delay – Offered to pay 10% of tax demand – Court directed the CIT(A) to dispose the application for condonation of delay – Not to recover further tax amount until disposal of applications for condonation of delay [S. 246A, Art. 226]

Petitioner filed appeals before CIT(A) along with applications for condonation of delay in filing appeals as also for stay on assessment orders. Petitioner, apprehending that respondent authority would go to next step and withdraw entire tax amount from its account already frozen by revenue, filed writ petition seeking direction to CIT(A) to keep all coercive proceedings including freezing of bank accounts of petitioner under abeyance till final disposal of said appeals. Petitioner also offered to deposit 10 percent of tax as demanded in assessment orders. Court directed the petitioner to deposit 10 percent of tax amount within a week whereas revenue should not recover tax amount until disposal of condonation of delay application within two weeks from assessee’s representation.

Hi Care Gloves (P.) Ltd. v. DCIT (2019) 267 Taxman 42 (Ker) (HC)

73. 222 : Collection and recovery – Certificate to Tax Recovery Officer – Amalgamation – Tax Recovery Officer could not seek recovery of taxes of reassessment from assessee-company inasmuch as assessee neither had been served with notice of reopening of assessment, nor had any occasion to participate in such reassessment proceedings. [S. 147, 148, Art. 226]

Company Mahadev Floorings (India) Pvt. Ltd. was amalgamated with assessee-company. AO had reopened assessment of company Mahadev Floorings (India) Pvt. Ltd. and passed assessment order on raising tax demand upon it. Subsequently Tax Recovery Officer issued on assessee-company a notice to recover tax dues of company Mahadev Floorings (India) Pvt Ltd and on failure of assessee to pay tax dues of company Mahadev Floorings (India) Pvt Ltd had attached bank accounts of assessee. On writ the court held that Tax Recovery Officer could not seek recovery of taxes due of Mahadev Floorings (India) Pvt. Ltd. arising out of order of reassessment from assessee-company inasmuch as assessee neither had been served with notice of reopening of assessment, nor had any occasion to participate in such reassessment proceedings. Accordingly the notice of recovery was set aside and attachment of bank accounts were lifted. (AY. 2010-11)

Hinal Estates (P.) Ltd. v. UOI (2019) 266 Taxman 411 (Bom)(HC)

74. 222 : Collection and recovery – Certificate to Tax Recovery Officer – Attachment and sale of immovable property – Limitation – Attachment of immovable property in 1997 – Proclamation of sale in February, 2019 – Barred by limitation [Sch. II R. 68B. Art. 226]

Allowing the petition the Court held that Part D of Chapter XVII of the Income-tax Act, 1961 pertains to collection and recovery of tax. Schedule II to the Act pertains to the procedure for recovery of tax. The Schedule contains detailed rules for recovery of unpaid taxes through various modes envisaged in sub-section (1) of section 222. One of the modes is attachment and sale of immovable property. Rule 68B was inserted with effect from June 1, 1992. For the first time with effect from June 1, 1992 a time-limit of a period of three years was prescribed for sale of attached immovable property starting from the end of the financial year in which the order giving rise to a demand of tax, interest, etc., became conclusive. Sub-rule (4) of rule 68B provides for the consequences of the immovable property not being sold within such time. Under this sub-rule in such a situation, the attachment order in relation to the property would be deemed to have been vacated on the expiry of the time-limit specified.

Court held, that the attachment of the immovable properties was ordered in the year 1997. The sale proclamation which was made in February, 2019 was thus, hit by the period of limitation prescribed under rule 68B. The sale proclamation was barred by limitation. (AY. 1974-75 to 1999-2000)

Sapana Charudatt Ranadive v. ITO (2019) 418 ITR 193 / 181 DTR 127 / 310 CTR 432 / 266 Taxman 4 (Bom) (HC)

75. 225 : Collection and recovery – Stay of proceedings – Disputed demand – Deposit of 20 percent tax of demand is not a condition precedent – Directed to pass reasoned order [S.226, Art. 226]

Court held that the AO has to consider the case of the particular assessee on the merits and if he comes to the conclusion that the assessee has a case for grant of stay, then subject to deposit of 20 per cent. of the disputed demand, the outstanding demand may be stayed and in certain cases. The condition of pre-deposit of 20 per cent. of the disputed demand is neither contemplated by the memorandum nor is there legislative sanction mandating such deposit for hearing of an application for stay. Directed to follow the guidelines prescribed by the Bombay High court in UTI Mutual Fund v. ITO (2012) 345 ITR 71 (Bom) (HC); KEC International Ltd. v. B.R. Balakrishnan (2001) 251 ITR 158 (Bom) (HC), Coca Cola India P. Ltd. v. Add. CIT (2006) 285 ITR 419 (Bom) (HC)

Aarti Sponce & Power Ltd. v. ACIT (2019) 418 ITR 257 (Chhatisgarh) (HC)

76. 234C : Interest – Deferment of advance tax – Demerger of the unit – Not justified in levying the interest for period before acquisition of cement business by assessee- Interest is directed to be waived. [S. 119(2), Art. 226]

Assessee-company was a successor of company Samruddhi Cement Ltd. which was incorporated on 4-9-2009 as a subsidiary of Grasim Industries Ltd. Grasim Industries Ltd demerged its cement unit which was taken over by Samruddhi Cement Ltd. Scheme of demerger was framed which envisaged 1-10-2009 as appointed date. Scheme was approved by High Court and effective date was fixed as 18-5-2010. Scheme provided that Grasim Industries Ltd. would carry on cement business from appointed date to effective date in trust and on behalf of SCL and advance tax payment made by Grasim Industries Ltd in respect of profits of cement business would be deemed to be paid by Samruddhi Cement Ltd and that scheme would have retrospective effect. Pursuant to such clause, Grasim Industries Ltd. paid advance tax on profits of cement business in two instalments falling due on 15-3-2012 and 15-9-2012. AO held that Samruddhi Cement Ltd had not paid advance tax instalments falling due on 15-6-2009 and 15-9-2009 and, thus, interest under S. 234C was levied. Assessee claimed for waiver of interest under S. 234C which was denied. Court held that scheme itself provided that all taxes paid by Grasim Industries Ltd. on profit of cement business arising on and after 1-10-2010 would be deemed to be paid by Samruddhi Cement Ltd. and scheme was approved having a retrospective effect. Further, Samruddhi Cement Ltd. was incorporated only on 4-9-2009 and company was not in existence on 15-6-2009. Further, by time second instalment fell due on 15-9-2009, cement business from Grasim Industries Ltd. was not acquired by Samruddhi Cement Ltd. Accordingly the interest levied upon assessee under S. 234C was to be waived. (AY. 2010-11)

Ultratech Cement Ltd. v. CIT (2019) 266 Taxman 390 (Bom) (HC)

77. 237 : Refunds – Tax deduction at source – Refund cannot be withheld on account of computer glitch at Central Processing Center – Department was to be directed to release refund with statutory interest after manually computing same. Court also observed that “We expect the department to address this larger issue so that similar disputes do not have to travel to the High Court for resolution.” [Art.226]

Assessee suffered sizeable deduction of tax at source. In assessment, refund of ₹ 224.28 crore arose. Department raised issue that assessee had pending demands for other assessment years. Department stated that assessee’s refund claim had not been released on account of computer glitch at Central Processing Center presumably for reason that system was not accepting stay of demands so far made for other years. On writ the Court held that refund arose out of order of assessment could not be withheld on ground of technical difficulty of system. Accordingly the Department was to be directed to release refund with statutory interest after manually computing same. Court also observed that Per Court:

‘Surely, before the department, there would be large number of cases of assessees where the refund claim out of an order of assessment or appellate order arises as against which the same assessee may have demands for other assessment years, recovery of which may have been suspended. In all such cases, similar difficulty may be faced by the department. We expect the department to address this larger issue so that similar disputes do not have to travel to the High Court for resolution.’) (AY. 2014-15) WP No. 2435 of 2019 dt 4-10-2019)

Vodafone Idea Ltd. v. CIT (2019) 267 Taxman 408 (Bom.)(HC)

78. 241A : Withholding of refund in certain cases – AO cannot withhold refund without processing the return as well as revised return u/s 143(1) – Show cause notice to withhold the refund was quashed – Withholding the refund is without authority of law and liable to be set aside. [S.143(1)]

Assessee filed its return seeking refund. Subsequently, return so filed was revised. Despite not having processed the return of income under section 143(1) a notice was issued by the Assessing Officer proposing to withhold the refund relatable to assessment year 2017-18, in view of section 241A.

On writ the Court held that S. 241A could only be invoked, after the refund due was determined under section 143(1) and, thus, impugned notice deserved to be quashed. Court held that it is an undisputed position that neither the regular return of income nor the revised return of income for the subject assessment year has been processed under section 143(1) till date. Consequently, the occasion to withhold any refund under section 241A at this stage does not arise. Therefore on the admitted facts the application/ invocation of section 241A of the Act is premature. Accordingly show-cause notice proposing to withhold refund due is quashed and set aside. (WP No. 1845 of 2019 dt. 16-09- 2019) (AY. 2017-18) (Also refer, WP No. 894 of 2019 dt 8-7-2019 (AY. 2015 16)

Tata Communications Ltd. v. Dy. CIT (2019) 267 Taxman 423 /182 DTR 249/311 CTR 1 (Bom.)(HC)

Tata Communications Ltd. v. Dy. CIT (2019) 181 DTR 9/310 CTR 805 (Bom.)(HC)

79. 241A: Withholding of refund in certain cases – Tax deduction at source – Merely because a notice was issued u/s. 143(2), it was not a sufficient ground to withhold refund – Withhold refund and the order denying refund on this ground alone would be laconic. [S.143(ID), 143(2), 197, Art. 226]

The assessee filed application u/s. 197 of the Act to issue the certificate for lower deduction of tax at source at 0.8% ACIT allowed deduction of TDS @1% and issued a notice requesting assessee to produce evidence/documents in support of claims made in its return. In reply, assessee submitted its e-reply along with relevant documents. Since the, assessee had not received any hearing notice, or assessment order in terms of S. 143(3) and the assessee was facing acute financial crunch on account of blockage of funds in form of excess TDS and delay in processing of tax refund, it filed an online complaint on portal of Centralized Public Grievance Redress And Monitoring System and requested DIT to expeditiously process pending income tax return. Meanwhile, DIT issued an intimation processing ITR filed by assessee wherein, tax liability of assessee was assessed and refund amount due to assessee was determined along with eligible interest u/s. 244A. The AO issued the notice u/s. 143(2) of the Act and withheld the refund due to the assessee. On writ the court held that merely because a notice was issued u/s. 143(2), it was not a sufficient ground to withhold refund. Accordingly the AO was directed to grant the refund as per the law. (AY. 2017-18, 2018-19)

Maple Logistics Pvt. Ltd. v. (2019) 184 DTR 408 /(2020) 312 CTR 141 / 420 ITR 258 (Delhi) (HC)

80. 244A : Refunds – Interest on refunds – Entitle to interest on excess self assessment tax from date of payments till refund [S.14OA, 244(1)(b)]

Dismissing the appeal of the revenue the High Court held that the assessee is entitled to interest on excess self assessment tax from date of payment till refund. Followed PCIT v. Bank of India (ITA No. 742 of 2016 dt. 10-12 2018).

PCIT v. Bank of India (2019) 112 Taxmann.com 327/ (2020) 268 Taxman 318 (Bom) (HC)

Editorial : SLP is granted to the revenue PCIT v. Bank of India (2020) 268 Taxman 318 (SC)

81. 250 : Appeal – Commissioner (Appeals) – Duties – Must pass a speaking order on merits by expressing reasons and finding in support of the conclusion – Matter remanded to the CIT(A) for passing speaking order [Art. 226]

Assessee filed an appeal to CIT(A) against order of scrutiny assessment done by AO. CIT (A) disposed appeal holding that Assessing Officer’s order was a self speaking order and did not require interference. On writ the Court held that CIT(A) being a fact finding authority, had to consider assessment order on grounds raised in appeal and pass a speaking order on merits by expressing reasons and findings in support of conclusion. Accordingly the order of CIT(A) was set aside and matter was to be remitted for passing fresh order, such order must be a speaking order with reasons and findings. (AY. 2016-17)

Ajji Basha v. CIT (2019) 267 Taxman 545 (Mad.)(HC)

82. 251 : Appeal – Commissioner (Appeals) – Powers – CIT(A) has the power to decide stay petition – He should not direct the assessee to file stay petition before AO
    [S. 220(6), Art. 226]

Assessee filed petition before CIT(A) for stay of demand in assessment order. CIT (A) directed assessee to file stay applications before AO under S. 220 of the Act. On writ the Court held that discretion and power is independently available to CIT(A) to decide stay petitions. Since he disposed of stay applications by an order that was merely in nature of an advice, he failed to exercise discretion and jurisdiction vested with him. Accordingly the matter remanded to CIT (A) to decide the stay petition on merits. Followed Mavilayi Service Co-Operative Bank Ltd v. CIT (2019) (2) KLT 597 (FB) (Ker) (HC)

Kallettumkara Service Co-operative Bank Ltd. v. ITO (2020) 268 Taxman 10 (Ker) (HC)

83. 254(1) : Appellate Tribunal- Duties – Relying on the case laws not cited by both the parties – Not dealing with the case law cited by the representative of the assessee – Matter remanded to the Tribunal to pass the fresh order. [S.80IB (10)]

The Tribunal dismissed the appeal of the assessee by relying on 63 cases which were not cited by either side. The Tribunal also not given any finding on case law relied by the authorised representative. High Court at the stage of admission itsself allowed the appeal by observing that, this manner of disposing appeals by the Tribunal is not expected of it and cannot stand to the scrutiny of law and justice. The Tribunal cannot refer to decisions on its own without giving the litigant an opportunity to distinguish it. This results in a breach of the principles of natural justice. It also cannot omit to deal with the decisions relied upon by the litigant. Not dealing with the cited decisions leads to the order being bad as an order without reasons. Accordingly the matter remanded. (ITA No. 1009 of 2017, dt. 30-01-2020) (AY. 2007-08) (also refer, DSP Investment Pvt. Ltd. v. Add. CIT ITA No 2342 of 2013 dt 8-3-2016 (Bom) (HC), Reliance Infrastructure Ltd. v. Dy. CIT ITA No. 701 of 2014 dt. 29-11-2016 (Bom) (HC), Dattani and Co. v. ITO ITA No. 847 of 2013 dt 21-10-2013 (Guj) (HC), Lakhmi Mewal Das v. ITO (1972) 84 ITR 649 (Cal) (HC) (659), Kranti Associates Pvt. Ltd. v. Masood Ahamed Khan & ors (2010) 9 SCC 496)

Bhavya Construction Co. v. ACIT (Bom)(HC), www.itatonline.org

84. 254(1) : Appellate Tribunal – Duties Ex-partedecision on first day of hearing – Issue covered in earlier years – Rejection of application for recalling the order is held to be not justified – Directed to hear the appeal on merits. [S.254(2), Art. 226]

In course of appellate proceedings, assessee did not cause appearance before Tribunal. Tribunal allowed revenue’s appeal ex-parte. Assessee filed an application under S. 254(2) of the Act to recall said order. Tribunal rejected assessee’s application on ground that assessee was not able to point out any mistake in Tribunal’s order. On writ the Court held that Tribunal had decided issue in revenue’s favour on first date of hearing itself and, thus, Tribunal could have accommodated assessee’s request for rectification of order. Court also held that the issue before Tribunal was a recurrent issue and assessee had succeeded in respect of same in earlier years. Accordingly the order of Tribunal rejecting assessee’s application was set aside and, matter was to be remanded back to Tribunal for disposal on merits of case. (AY. 2000-01)

Universal Cold Storage Ltd. v. DCIT (2020) 268 Taxman 178 (Mad)(HC)

85. 254(1) : Appellate Tribunal – Duties – Delay of 253 days in filing the appeal before the Tribunal is condoned – Directed the assessee to deposit ₹10,000 / with the Maharashtra State Legal Services Authority and submit receipt of the same before the office of the Tribunal – Directed the Tribunal to decide on merit [S.12A(3), 253]

The assesee has preferred an appeal before the Tribunal against the cancellation of the registration. The appeal was delayed by 253 days and affidavits were filed. Tribunal refused to condone the delay on the ground that there were inconsistencies in the affidavit filed by the assessee. On appeal High Court condoned the delay and directed the Tribunal to decide on merit. Court also directed the assessee to deposit ₹ 10,000/- with the Maharashtra State Legal Services Authority and submit receipt of the same before the office of the Tribunal. (ITA No. 942/PUN/2010 dt 21-03-2017). (ITA No 1762 of 2017 dt 22-01 2020 (AY. 2009-10)

Nandkishor Education Society v. CIT (Bom) (HC) (UR)

86. 254(1) : Appellate Tribunal – Duties – Strictures – Disallowance of administrative expenses – Matter remanded to the Tribunal following the earlier year order. [S.40(a)(ia), 40(b)(a), 194C]

The department has raised the question regarding the disallowance of expenses for failure to deduct tax at source. During the course of the arguments, learned standing counsel for Revenue has fairly placed before the Court a copy of order of this Court in the case of CIT v. ITD CEM India JV, (2018) 405 ITR 533 (Bom) (HC) and submits that the same issue was gone into by this Court in respect of the same assessee for the assessment year 2008-09. Regarding deletion of the disallowance under the head of ‘administrative expenses’, it was held that it was a concurrent finding of fact and no substantial question of law arose therefrom. However, on the question of deletion of the amount of salary which was disallowed by the Assessing Officer under Section 40(ba) of the Income Tax Act, 1961, the same was remanded back to the Tribunal for a fresh decision on merit and in accordance with law. Honourable Court referred “para 25. However, we have expressed our displeasure and unhappiness at the manner in which the Tribunal approached the matter/issue insofar as the applicability of Section 40(ba) (question no. 10(a) reproduced above) of the IT Act is concerned, we allow this Appeal. We set aside the Tribunal’s order to that extent. We restore the issue to the file of the Tribunal for being decided afresh on merits and in accordance with law. The Tribunal shall not be influenced in any manner by it’s earlier observations. We also clarify that when we note the rival contentions, beyond that exercise, we have expressed no opinion on the correctness of these contentions. All of them are open insofar as this issue is concerned for being raised before the Tribunal. There will be no order as to costs.” Following the order the matter is remanded to the Tribunal. (ITA No. 1246/Mum/2015 dt. 19-10-2016) (ITA NO. 1742 of 2017 dt. 20-01-2020 (AY. 2011-12)

PCIT v ITD CEM INDIA JV (Bom) (HC) (UR)

87. 254(1) : Appellate Tribunal – Powers – Jurisdictional issue – Reassessment – CIT(A) has not decided – Deemed to have been decided against – Rule 27 of the Income Tax Tribunal Rules would entitle a respondent who has neither preferred an appeal nor cross objections to relief on a point decided in favour of the appellant by the lower appellate authority – Order of Tribunal, quashing of reassessment and also on merit is affirmed [S.80IA, 147, 148, R. 27]

Assessment which was completed u/s. 143(3) was reopened and disallowance was made in respect of claim u/s. 80IA of the Act. Before CIT(A) the appellant challenged the jurisdiction u/s. 147 as well as on merits. CIT(A) decided the issue on merits and held that as he is deciding on merits it is not necessary to decide the issue on reassessment. Revenue filed an appeal before the Tribunal. The assessee neither filed an appeal nor filed any cross objection. The assessee filed application under Rule 27 and challenged the reassessment proceedings. The Tribunal held that when the CIT(A) has decided the issue, it is presumed that the issue is decided against the assessee hence the application under Rule 27 is held to be valid and accordingly the Reassessment was quashed. The Tribunal also affirmed the order of the CIT(A) on merit. On appeal by the revenue, dismissing the appeal the Court held that Rule 27 of the Income-Tax Tribunal Rules would entitle a respondent who has neither preferred an appeal nor cross objections to relief on a point decided in favour of the appellant by the lower appellate authority. Court also held that the language employed in Rule 27 of the Rules is clear and it deals with cases where the respondent may support the order on the grounds decided against him. Rule 27 of the Rules states that though the respondent may not have appealed, he may support the order appealed against on any of the grounds decided against him. As pointed out by us earlier, the CIT(A) has recorded that the validity of the reassessment proceedings was hotly debated before him. However, the CIT(A) proceeded to take up the issue relating to the relief, which the assessee would be entitled to under Section 80-I of the Act and proceeded to grant the same on the close of its order and the CIT(A) would state that since the appeal has been allowed on merits under Section 80-I of the Act, there is no necessity for him to give a finding on the issue of reopening of assessment under Section 147 of the Act. Thus, the CIT(A) did not adjudicate the correctness of the reassessment proceedings, which was challenged by the assessee. It is deemed that the said issue was decided against the assessee and that the assessee was entitled to canvass the said issue before the Tribunal without independently filing an appeal in the light of the Rule 27 of the Rules. Therefore, the Tribunal was right in permitting the assessee to argue on the issue relating to the validity of the reassessment proceedings. (AY. 1996-97)

CIT v. India Cements Ltd. (2019) 181 DTR 105 (Mad) (HC)

88. 254(1) : Appellate Tribunal- Powers – Registration – Interpretation – Tribunal can direct the Commissioner to grant the registration. [Ss.12A 12AA]

The Appellate Tribunal while hearing an appeal in a matter where registration under S. 12AA has been denied by the Commissioner can itself pass an order directing the Commissioner to grant registration if it disagrees with the satisfaction of the Commissioner on the basis of material already on record before the Commissioner. However the power is not to be exercised as a matter of course and remand to the Commissioner is to be made where the Tribunal records a divergent view on the basis of material which has been filed before it for the first time. Remand for determination of the question regarding grant of registration to a trust would also be necessitated in cases where the registration application has been rejected by the Commissioner on technical grounds without recording his satisfaction as contemplated under S. 12AA of the Act, 1961 and such decision is overturned by the Tribunal. The powers of the Appellate Tribunal are co-extensive with the powers of the Commissioner under S. 12AA of the Act, 1961 subject to what has been indicated above. However an order for registration can be issued only after recording satisfaction with regard to the genuineness of activities of the trust as provided under S. 12AA. The words “as it thinks fit” used in relation to the powers of the Appellate Tribunal exercisable under S. 254(1) of the Income-tax Act, 1961 are of the widest amplitude. The expression confers wide jurisdiction enabling the appellate authority to take an entirely different view on the same set of facts. The powers given under S. 254 are to be read along with other provisions of the Act.

CIT v. Reham Foundation. (2019) 418 ITR 205 (FB)(All (HC)

89. 254(2) : Rectification of mistake apparent on record – Application for rectification was filed within period of six months – Order recalling the order is beyond period of limitation is held to be valid. [S.255(5), ITAT R. 24, Art. 226]

Tribunal recalled its order in the case of Nutrela Marketing Pvt. Ltd. v. ITO ITA No. 3910/ Mum/ 2010 dt 10-01-2018 and placed for hearing. After hearing the Tribunal recalled the earlier order on 1-2-2019. On writ the department contended that miscellaneous application was filed by the assessee on 9-7-2018 i.e., within period of six months however the Tribunal did not dispose of the same within the period of limitation, hence the order passed by the Tribunal is beyond the jurisdiction. Court held that the initial order passed by the Tribunal on 10th January, 2018 was an ex-parte one for the AY. 2006- 07. The limitation of six months as noticed above was substituted by the Finance Act, 2016 with effect from 1st June, 2016. Therefore, for the assessment year under consideration the limitation period may be construed to be four years from the date of the order. Even otherwise, if a view is taken that since the order was passed by the Tribunal on 1st February, 2019, the substituted limitation period of six months would be applicable, then also it is seen that the said period of six months was available to respondent till 31st July, 2018. Respondent had filed the application for recall of the ex-parte order on 9th July, 2018 within the limitation period of six months. However, Tribunal passed the impugned order only on 1st February, 2019. Court also observed that from a careful reading of the provision, it is seen that Tribunal is vested with the power to rectify any mistake apparent from the record to amend any order passed by it under sub-section (1) of Section 254 at any time within six months from the end of the month in which the order was passed, provided the mistake is brought to its notice by the assessee or by the Assessing Officer.. The use of the expression “may” in the aforesaid provision is clearly indicative of the legislative intent that the limitation period of six months from the end of the month in which the order was passed is not to be construed in such a manner that there can not be any extension of time beyond the said period of six months. This is so because the assessee or the Assessing Officer can only bring the mistake to the notice of the Tribunal. The assessee or the Assessing Officer has no control over the Tribunal. For one reason or the other, the Tribunal may not be in a position to pass the order under Section 254(2). For the inability of the Tribunal to pass such an order within the period provided, neither the assessee nor the revenue should suffer. What therefore becomes relevant is that the assessee or the Assessing Officer should bring the mistake to the notice of the Tribunal within the limitation period. (Referred Srei Infrastructure Finance Ltd. v. Tuff Drilling Private Limited, (2018) 11 SCC 470. Grindlays Bank Ltd. v. Central Government Industrial Tribunal, 1980 Supp SCC 420, Kapra Mazdoor Ekta Union v. Birla Cotton Spinning and Weaving Mills Limited, (2005) 13 SCC 777, Sree Ayyanar Spinning and Weaving Mills Ltd. v. CIT (2008) 301 ITR 434 SC, Harshavardhan Chemicals and Minerals Limited v. UOI (2002) 256 ITR 767 (Raj) (HC), Assam Company Ltd. v. State of Assam (2001) 248 ITR 567 (SC)) (MA No. 483/M/2018 dt. 1-02-2019 (AY. 2006-07) (WP No. 2858 of 2019 dt 24-01-2020)

PCIT v. ITAT (Bom) (HC) (UR)

90. 263 : Commissioner- Revision of orders prejudicial to revenue – Rectification of mistake – When the claim is justifiably allowed by the AO the rectification order could not be construed to be erroneous and prejudicial to the interest of revenue [S.154]

AO on the basis of rectification application rectified the assessment order and allowed unabsorbed depreciation of earlier years. CIT revised the order. On appeal the appellate Tribunal set aside the revision order following the judgement in in CIT v. Virmani Industries Pvt. Ltd., (1995) 216 ITR 607 which view has been followed by several High Courts as well as by the Tribunal and held that when the claim of the respondent was justifiably allowed by the assessing officer then the same could not have been interfered with by the Commissioner by invoking the provisions of S. 263 of the Act because the rectification order could not be construed to be erroneous and prejudicial to the interest of Revenue. On appeal by the revenue, High Court affirmed the view of the Tribunal. (Arising from I.T.A. No. 3055/ Mum/2015 dt. 28-10-2015) (ITA No. 1029 of 2017 dt 23-2-2020 (AY. 2011-12)

PCIT v. Destimoney India Services Pvt. Ltd. (Bom) (HC)

91. 264 : Commissioner – Revision of other orders – Income from sale of property is shown as short term capital gains – Revision application made to assessee the income as business income – CIT is directed to dispose the petition expeditiously. [S.5A, 28(i), 45(2), 143(1), Portuguese Civil Code, Art. 226]

Petitioners have filed the return of income showing the sale of property income as short term capital gains. The return was accepted u/s. 143(1) of the Act. The petitioner there after filed the revision application u/s. 264 of the Act contenting that they have wrongly shown as short term capital gains the correct position should have been the income should have shown as business income. CIT rejected the petition on the ground that application on the ground that it was afterthought to avoid the payment of capital gains tax. Allowing the petition the Court held that the petitioners have made a genuine error hence directed the CIT to dispose the petition expeditiously as possible and in any case within a period of four months from today. (WP No. 924 of 2019 dt. 14-1-2020 (AY. 2015-16)

Rajesh Prakash Timlo v. PCIT (Bom) (HC) (UR)

Vidya Rajesh Timlo v. PCIT (Bom) (HC) (UR)

92. 264 : Commissioner – Revision of other orders – Rejection revised return and rectification application – Delay in filing revision application – Directed to condone the delay – CIT is directed to decide on merit [S.139(5), 143(1), 154, Art. 264]

Court held that the revised return was rejected under S. 139(5) on a technical ground. The assessee filed a rectification application, on which no orders were passed. Without passing orders on the application for rectification, a demand notice was issued triggering a second application for rectification from the assessee which came to be dismissed. A demand was made on January 31, 2018, the second rectification request was filed by the assessee on February 25, 2018, the second rectification having been dismissed on July 2, 2018, the assessee ultimately filed a petition under S.264. Therefore, this was not a case where the assessee had not acted in time. The rejection of the application for revision solely on the ground of delay was not justified. CIT is directed to decide on merits. (AY. 2009-10)

Ramupillai Kuppuraj v. ITO (2019) 418 ITR 458 (Mad) (HC)

93. 271(1)(c) : Penalty – Concealment – Depreciation – Claim was withdrawn in the course of search proceedings – Deletion of penalty by the Tribunal is held to be justified [S.32, 132(4), 153A]

Assessee filed its return claiming depreciation on its intellectual property rights. During the course of search proceedings as per the statement u/s. 132(4) director of the company reduced the claim of depreciation. AO imposed penalty under S. 271(1)(c) for raising a false claim. On appeal the Tribunal held claim of depreciation being a plausible claim, mere fact that same was withdrawn during subsequent search proceedings, would not give rise to penalty. Followed CIT v. Reliance Petro Products (P) Ltd. (2010) 322 ITR 158 (SC) (AY. 2004-05)

PCIT v. Financial Technologies India Ltd. (2019) 112 taxmann.com 398 / (2020) 269 Taxman 33 (Bom) (HC)

Editorial : SLP of revenue is dismissed ; PCIT v. Financial Technologies India Ltd. (2020) 269 Taxman 32 (SC)

94. 271(1)(c) : Penalty – Concealment – Revised return filed prior to issuance of notice u/s. 153C – No satisfaction was recorded – Deletion of penalty is held to be valid. [S.153C]

Dismissing the appeal of the revenue the Court held that, revised return filed prior to issuance of notice u/s. 153C and no satisfaction was recorded, deletion of penalty is held to be valid. Mak Data Pvt Ltd v. CIT (2013) 358 ITR 593 (SC) (AY. 2010-11)

PCIT v. Prabhjot Kaur Chhabra (Smt.) (2019) 419 ITR 94 (MP) (HC)

Editorial : SLP of revenue is dismissed, PCIT v. Prabhjot Kaur Chhabra (Smt.) (2019) 416 ITR 78 (St)

95. 271(1)(c) : Penalty – Concealment – Survey – Amount disclosed in the survey was included in return – Return was accepted – Levy of penalty is held to be not valid. [S.133A]

Dismissing the appeal of the revenue the Court held that amount disclosed in the survey was included in return. Return was accepted. Accordingly levy of penalty is held to be not valid. (AY. 2012-13)

CIT v. Shree Sai Developers. (2019) 418 ITR 306 (Guj) (HC)

96. 271AAA : Penalty – Search initiated on or after 1st June, 2007 – Undisclosed income and specifies manner in which such income derived – Failure of the raiding party to elicit a response from assessee regarding manner of deriving income – Deletion of penalty by the Tribunal is held to be valid [Ss.132(4), 271AAA(2)]

Dismissing the appeal of the revenue the Court held that, failure of the raiding party to elicit a response from assessee regarding manner of deriving income- Deletion of penalty by the Tribunal is held to be valid. (R/TA No. 836 of 2028 dt 10-07-2018) (AY. 2011-12)

CIT v. Backbone Enterprise Ltd. (2020) 420 ITR 305 (Guj) (HC)

97. 271AAA : Penalty – Search initiated on or after 1st June, 2007 – Undisclosed income and specifies manner in which such income derived – Failure of the raiding party to elicit a response from assessee regarding manner of deriving income – Deletion of penalty by the Tribunal is held to be valid [S.132 (4), 271AAA(2)]

Dismissing the appeal of the revenue the Court held that both the CIT (A) as well as the Tribunal had recorded concurrent findings of fact that during the course of search the director of the assessee-company had admitted undisclosed income of ₹ 15 crore as unaccounted cash receivable, for the year under consideration, i.e., financial year 2010-11. The director of the assessee in his statement, had explained that the income was earned out of booking/selling shops and had specified the buildings. Thereafter the assessee could not be blamed for not substantiating the manner in which the disclosed income was derived. The cancellation of penalty by the Tribunal was justified. (R/TA No. 174 & 540 of 2019 dt. 17-09-2019) (AY. 2011-12)

CIT v. Patdi Commercial and Investment Ltd. (2020) 420 ITR 308 (Guj) (HC)

98. 271AAA : Penalty – Search initiated on or after 1st June, 2007 – Statement u/s. 132(4) – Partner specifying the manner in which the disclosed income was earned – Entitle to claim immunity [S.132(4)]

Dismissing the appeal of the revenue the Court held that, during the process of recording a statement of the assessee under S. 132(4). In reply to a query to a partner of the assessee-firm to elaborate on the details of the undisclosed income and how it was earned by him and the group, the partner had stated that the undisclosed income of
₹ 35 crore declared by him and his group was earned out of a land-related transaction which was not recorded in the books of account. He had further stated that the break-up of such income person-wise and firm-wise would be submitted after opening the bank locker and that such disclosure was made with the consent of the family members and all the partners. The answer of the partner thus, in addition to confirming the disclosure of the undisclosed income, further stated that the income was earned by the group out of a land-related transaction which was not previously recorded in the books. This was thus specifically in compliance with the requirement of establishing the manner in which the income was earned. Although at that stage, he could not give the break up of such income person-wise or firm-wise citing the reason of sealing of the bank locker that would not be of much relevance. The answer was in sufficient compliance with the requirement of the disclosing the manner of earning the income.

PCIT v. Sun Corporation (2019) 419 ITR 414 (Guj) (HC)

99. 276 : Offences and prosecutions – Deposit of self assessment tax belatedly – No inference can be drawn that there was wilful attempt on part of assessee to evade payment of tax – Prosecution was quashed [S. 132, 140A, 276CC]

The assessee is a co-operative society. The premises of the assessee was subjected to search and seizure under S. 132. Consequent to search, the AO issued a notice under S. 153A to file its return of income for the assessment years 2006-07 to 2011-12. Since there was no compliance of the aforesaid notice, the AO issued a show-cause notice calling upon the assessee as to why prosecution for the offence punishable under S. 276CC could not be initiated.

In response to the said show-cause notice, the assessee filed returns of income for the assessment years 2010-11 and 2011-12 and declared the total income of certain amount and the total tax payable at certain amount. But the assessee failed to pay the self-assessment tax along with the return of income under section 140A. Thereafter, the assessee sent a cheque of certain amount towards self-assessment tax due. On the back of the said cheque, it was instructed that ‘cheque to be presented at the time of registration of the property’. In view of this instruction, department did not encash the said cheque. The revenue contended that the assessee had willfully and deliberately made an attempt to create circumstances to enable them to evade payment of tax, a compliant was lodged before the court for economic offences, seeking prosecution of the assessee for the offence punishable under S. 276C(2) of the Act. Respondent-department has pointed out that all the payments were made by the petitioners subsequent to the lodging of the compliant and therefore, the said payment do not absolve the petitioner from the rigors of S 276C(2). Even the cheque was issued with a rider not to encash the same. These circumstances, clearly disclose mens rea on the part of the petitioners to evade tax and hence there is no reason to quash the proceedings. The gist of the offence under S. 276C(2) is the wilful attempt to evade any tax, penalty or interest chargeable or imposable under the Act. What is made punishable under this section is an ‘attempt to evade tax penalty or interest’ and not the actual evasion of tax. ‘Attempt’ is nowhere defined in the Act or in the Indian Penal Code. In legal echelons ‘attempt’ is understood as a ‘movement towards the commission of the intended crime’. It is doing ‘something in the direction of commission of offence’. Viewed in that sense, in order to render the accused guilty of ‘attempt to evade tax’ it must be shown that he has done some positive act with an intention to evade tax. In the instant case, the only circumstance relied on by the respondent in support of the charge levelled against the petitioners is that, even though accused filed the returns, yet, it failed to pay the self-assessment tax along with the returns. This circumstances even if accepted as true, the same does not constitute the offence under section 276C(2). The act of filing the returns by itself cannot be construed as an attempt to evade tax, rather the submission of the returns would suggest that petitioner No. 1 had voluntarily declared his intention to pay tax. The act of submitting returns is not connected with the evasion of tax. It is only an act which is closely connected with the intended crime, that can be construed as an act in attempt of the intended offence. A positive act on the part of the accused is required to be established to bring home the charge against the accused for the offence under section 276C(2).

In the case on hand, conduct of the assessee making payments in terms of the returns filed by him, though delayed and made after coercive steps were taken by the department do not lead to the inference that the said payments were made in an attempt to evade tax declared in the returns filed by him. Delayed payments, under the provisions of the Act, may call for imposition of penalty or interest, but by no stretch of imagination, the delay in payment could be construed as an attempt to evade tax so as to entail prosecution of the petitioners for the alleged offence under section 276C(2). In that view of the matter, the prosecution initiated against the petitioners, is illegal and tantamount to abuse of process of Court and is liable to be quashed. For the aforesaid reasons, petitions are allowed. The proceedings initiated against the petitioners are quashed. It is made clear that this order shall not come in the way of the department taking necessary steps for recovery of tax, if any, due and payable by the petitioners in accordance with law. (AY. 2006-07 to 2011-12)

Vyalikaval House Building Co operative Society Ltd. v. IT (2019) 267 Taxman 81 (Karn)(HC)

Wealth-tax Act, 1957

100. 25 : Commissioner – Revision of other orders – Condonation of delay – Beyond six years – CBDT circular prescribing time limit for condonation – Not binding on High Court – Delay condoned and directed the Commissioner to decide on merit. [S. 2(ia)(i)(4), 25(1)(c) (ii), ITAct, S. 264 Art. 226]

The petitioner erroneously included the commercial and residential properties for the purpose of wealth tax though the said properties were let out for a minimum period of 300 days and exempt as per S. 2(ia)(i) (4) of the Act. The petitioner became aware of the exempt provision in the year 2015. The petitioner filed an application for revision of the order with application for condonation of delay. The Commissioner rejected the applications for condonation of delay by referring the Circular of the Board No 9 of 2015 (R. No 312/22/15-OT) (2015) 374 ITR 25 (St) wherein the Board instructed that delay beyond six years from the relevant year cannot be condoned. On writ the Court held that petition pertained to assessment years 2003-04 to 2012-13. This was a case of over-statement of wealth and it was not a case of understatement or non-filing of returns. More importantly, the assessees had also paid the tax on the wealth that had been overstated in the returns. The respondent had even recorded in the orders that the properties which had been erroneously included in the returns by the petitioners were clearly exempt under section 2(ea)(i)(4) of the Wealth-tax Act. The order was to be set aside in so far as it rejected the assessees’ request for condonation of delay for the assessment years 2003-04 to 2010-11. The other part of the order wherein the prayer for condonation of delay for the assessment years 2011-12 and 2012-13 was acceded to was to be sustained. Court held that the Circular is not binding on High Court. (AY. 2003-04 to 2012-13]

Lakshmi Muthukrishnan v. PCIT (2019) 418 ITR 513 (Mad) (HC)

Vasanthi Muthukrishnan v. PCIT (2019) 418 ITR 513 (Mad) (HC)

101. 271AAA : Penalty – Search initiated on or after 1st June, 2007– AO must establish there was undisclosed income – estimated income not undisclosed income – No specific finding in respect of any specific seized material or undisclosed income detected as a result of search – Penalty is not leviable [S.132]

The AO levied a penalty of ₹ 76,42,611/- under S. 271AAA of the Income-tax Act, 1961 at 10 per cent after computation of an undisclosed income of ₹ 7,64,26,117/-. The penalty order did not provide for any specific finding in respect of any specific seized material or undisclosed income detected as in the course of search. The CIT(A) deleted such the penalty on the grounds that the Assessing Officer had not examined the matter properly under S. 271AAA and assessed the income mechanically either on an estimated basis or on account of the assesse’s inability to produce audited accounts for certain entities. The CIT (A) had specifically noted in the quantum proceedings that the principles of natural justice were not followed. On appeal, it was held that the burden of proof in the penalty proceedings is independent and greater than in the assessment proceedings and the assessment proceedings and penalty proceedings are different. While levying the penalty, the AO had nowhere mentioned specifically any undisclosed income within the meaning of undisclosed income given under S. 271AAA . The penalty order was devoid of any specific finding in respect of any specific seized material or undisclosed income detected as a result of search. It was incumbent upon the Assessing Officer to first establish that there was undisclosed income within the meaning of S. 271AAA before any penalty under the section could be levied. (AY. 2012-13)

DY. CIT v. Himanshu Verma (2019)76 ITR 698 (Delhi) (HC)