1. S. 4 : Charge of income-tax – Incentives by way of excise duty refund and sales tax – Encourage setting up of new industrial unit in area which was devastated by earthquake – Capital receipts not exigible to tax

    Relying on the decision of Special Bench in the case of Reliance Industries Ltd. (2004) 88 ITD 273 (SB) (Mum) (Trib), and the decision of co-ordinate Bench of the Tribunal in the case of assessee’s group concern, Welspun Steel Ltd. (ITA No. 7630/M/211 dated 18th December, 2015), Tribunal held that incentives by way of excise duty refund and sales tax incentives given to assessee to encourage setting up of new industrial unit in area which was devastated by earthquake were capital receipts not exigible to tax. (AYs. 2008-09, 2009-10, 2010-11, 2011-12)

    Welspun India Ltd. v. Dy. CIT (2019) 69 ITR 617 (Mum)(Trib.)

  2. S. 4 : Charge of income- tax – Capital or revenue – Compensation received as a termination of business activity is held to be capital receipt [S.28(i)]

    Dismissing the appeal of the revenue, the Tribunal held that compensation received as a termination of business activity is held to be capital receipt. (AY. 2011-12)

    DCIT v. Rishabh Infrastructure (P.) Ltd. (2019) 176 ITD 150 (Raipur) (Trib.)

  3. S. 4 : Charge of income-tax – Association of persons – Mutuality – Assessee has not claimed the benefit of mutuality – AO can- not suo motu assessed the part of income as mutuality [S.2 (31)(v)]

    The Tribunal held that the assessee AOP had carried on its activities on commercial basis without making any distinction between members or non-members and had never claimed any benefit under mutuality. Accordingly the AO was unjustified in treating assessee as mutual entity suo motu and treating the part of receipt as mutuality. (AY. 2008-09 to 2015-16)

    Film Nagar Cultural Center v. DCIT (2019) 175 ITD 712 (Hyd) (Trib.)

  4. S. 10(37) : Capital gains – Agricultural land – Acquired by Government – Enhanced compensation including interest received would be eligible for exemption [S 45, Land Acquisition Act, 1894, S.28]

    Allowing the appeal of the assessee the Tribunal held that, where the Agricultural land is acquired by Government, enhanced compensation including interest received by the assessee is exempt from the tax. Accordingly TDS amount that was deducted on account of enhanced compensation was to be refunded. (AY. 2011-12)

    Baldev Singh v. ITO (2019) 176 ITD 1 (Delhi) (Trib.)

  5. S.12AA : Registration – Trust or institution – Power of the CIT is to register or refuse to register the Trust but cannot qualify the Trust as ‘general public utility trust’ – Tribunal directed the trust to be registered under section 12AA of the Act without any qualification [S. 2(15), 11, 12, 13]

    The CIT(E) has passed an order under section 12AA of the Act directing the registration of the trust as ‘general public utility trust’. It was argued that CIT(E) was supposed to register the trust or refuse to register the trust but there was no necessity to qualify it as ‘general public utility trust’. The taxpayer argued that the exemption under sections 11, 12 and 13 would be available only after the AO was satisfied with the genuineness of the activities carried out. The AO would every year examine whether the activities of assessee fell within the ambit of section 2(15) or not. Thereby it was submitted that order of CIT(E) should be modified and trust should be registered without any qualification. The Tribunal held that provisions of section 12AA of the Act provided that if the CIT(E) is satisfied with the object of the trust and genuineness of the activities, an order is needed to be passed in writing accepting or rejecting the trust. Thus the power of the CIT is to register or refuse to register the Trust but cannot qualify the Trust as ‘general public utility trust’. The Tribunal held that it is the AO who has to examine every year the activities of the Trust whether they fall within the clauses of charitable activities. Thereby the Tribunal directed the trust to be registered under section 12AA of the Act without any qualification. Thus the appeal of taxpayer was allowed.

    Tata Community Initiatives Trust v. CIT(E) (2019) 69 ITR 96 (SN) (Delhi) (Trib.)

  6. S. 12AA : Registration – Trust or institution – CIT(A) cannot question registration granted by CIT (E) [S. 251]

    Assessee was a Resident Welfare Association enjoying registration u/s. 12AA of the Act. The assessee being a trust registered under Section 12AA of the Act has claimed the entire income receipt as exempt u/s. 11 of the Act. The AO and CIT(A) has held that assessee has wrongly claimed registration u/s. 12AA of the Act and taxed the entire income receipt of the appellant. The Tribunal held that the CIT(E) is authorized to decide the allowability of registration u/s. 12AA of the Act and the CIT(A) has no authority to question the authority of CIT(E.) for granting registration u/s. 12AA of the Act.

    Srishti Resident Welfare Association v. ACIT (2019) 69 ITR 9 (SN)(Delhi)(Trib.)

  7. S. 14A : Disallowance of expenditure – Exempt income – Stock-in-trade – Dividend received incidentally – No disallowance can be made [R.8D]

    Allowing the appeal of the assessee the Tribunal held that even though dominant purpose of acquiring shares is not relevant for purpose of invoking provisions under section 14A, yet shares held as stock-in-trade stand on a different pedestal in relation to shares that were acquired with an intention to acquire and retain controlling interest in investee company. Accordingly where assessee purchased shares as stock-in-trade for purpose of trading, mere fact that assessee incidentally received dividend on those shares as declared by investee company, no disallowance can be made. Ratio in Maxopp Investment Ltd v. CIT (2018) 402 ITR 640 (SC). (AY.2008-09)

    Nice Bombay Transport (P.) Ltd. v. ACIT (OSD) (2019) 175 ITD 684 (Delhi) (Trib.)

  8. S. 14A : Disallowance of expenditure – Exempt income – No exempt income during assessment year – No disallowance can be made [R.8D]

    Dismissing the appeal of the revenue the Tribunal held that there was no exempt income earned by assessee during assessment year hence no disallowances can be made. (AY. 2014-15).

    ACIT v. Janak Global Resources (P.) Ltd. (2019) 175 ITD 365 (Chd.) (Trib.)

  9. S. 36(1)(vii) : Bad debt – Deposits written off for premises taken on lease for business purposes was allowable as a deduction [S.36(2)]

    On appeal by the Department, the Tribunal observed that the premises for which the security deposits were given were used for business purposes and the Ld. AO, in the alternative, had opined the said expenditure to be capital in nature which demonstrated that, the genuineness of the same was not under doubt by the AO. Accordingly, it was held that as the expenditure did not bring into existence any new asset or benefit of enduring nature and expenses being incurred during the course of business, it was revenue in nature and allowable as a deduction to the assessee. (AY. 2011-12)

    ACIT v. Sodexo Food Solutions India P. Ltd. (2019) 69 ITR 119 (Mum.)( Trib.)

  10. S. 40(b)(v) : Amounts not deductible – Partner – Remuneration – Book profit – Despite quantum not specified in partnership deed remuneration paid to partners is held to be allowable

    AO held that since quantum of remuneration had not been stated in partnership deed, which was mandatory condition remuneration paid to partner was disallowed by the AO which was confirmed by the CIT (A). On appeal the Tribunal held that S. 40(b)(v) provides is that in case payment of remuneration made to any working partner is in accordance with terms of partnership deed and does not exceed aggregate amount as laid down in subsequent portion of section, deduction is permissible. On fact partnership deed specifically provided that salary/remuneration was to be computed as per S. 40(b)(v) of the Act. Accordingly harmoniously interpreting provisions of S. 40(b)(v) as well as clauses of partnership deed, claim of remuneration paid to partners was to be allowable. (AY. 2014-15).

    Unitec Marketing Services. v. ACIT (2019) 175 ITD 90 (Mum) (Trib.)

  11. S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Business of bottling-cum-manufacturing of soft drink – Advances/deposits towards security against bottles & cases – Written off – Addition cannot be made as remission or cessation of liability [S. 32]

    Allowing the appeal of the assessee the Tribunal held that amount received as advance or deposit was written off cannot be assessed as remission or cessation of liability. (AY. 2007-08)

    Poona Bottling Company (P.) Ltd. v. ACIT (2019) 175 ITD 634 (Pune) (Trib.)

  12. S.44AD: Presumptive taxation – gross receipts – Assessee partner in firm receiving remuneration and interest – Interest and salary not business income – Assessee not eligible for presumptive taxation [S.28(v), 40(b)]

    The Tribunal held that while 28(v) taxes the interest & salary received from a partnership firm as business income to the extent the same is allowable as deduction u/s. 40(b) to the firm, this ‘per se’ would not translate such salary & interest to ‘gross receipts’/ ‘turnover’ (for the purpose of section 44AD) to the business of being partners in firm. In other words, it cannot be construed as gross receipts or turnover of business independently carried on by a partner. Dismissing the appeal of the assessee, the Tribunal upheld the order of the Ld. AO disapproving of application of section 44AD of the Act to the salary/interest income of the assessee. (AY. 2012-13)

    A. Anand Kumar v. ACIT (2019) 69 ITR 82 (SN) (Chennai) (Trib.)

  13. S. 45 : Capital gains – Non refundable entry fee – Right which is not enforceable by law, cannot be regarded as a capital asset – Actionable claim right cannot be assessed as capital gains – In order to attract the provisions of capital gains it is axiomatic that there has to be an income derived by the assessee on transfer of a capital asset [S.2(47)]

    The AO treated the actionable claim right as capital asset and taxed the same upon exercise of right in March 31, 2014, being the date when set-off was allowed by DoT. CIT(A) upheld the order of the AO. On appeal the Tribunal held that set off of non-refundable entry fee paid by group company UW to DoT in 2008, against the fresh spectrum fee payable by assessee towards allocation of telecom licenses cannot be regarded as ‘transfer’ under S. 2(47) of the Act. Further Tribunal rejected Revenue’s stand that consequent to the set off, capital asset acquired by assessee was extinguished and thus there was a ‘transfer’ under S. 2(47) of the Act of a short term capital asset (being held for a period less than 36 months). Tribunal held that ‘right’ which is not enforceable by law, cannot be regarded as a ‘capital asset’, thus holds that assessee had not acquired any capital asset from UW under the Actionable Claim agreement since UW did not hold such asset at any point of time. Tribunal ruled in favour of the assessee. (AY. 2014-15)

    Telenor (India) Communications Pvt. Ltd. v. CIT (2019)197 TTJ 1 / 173 DTR 65 (Delhi) (Trib.)

  14. S. 45: Capital gains – cash credits – Bogus accommodation entries – Penny stock – Sale of shares – Purchase by account payee cheque – Transaction was credited in DMAT account – Opportunity of cross examination was not given – Sale transaction cannot be treated as bogus merely on the basis of suspicious or surmises – Addition was deleted – Estimation of commission was also deleted [S. 10 (38), 68, 69C, 132(4)]

    On the basis of information from Investigation Wing the AO added amount of long-term capital gain as cash credits and also estimated commission. CIT(A) affirmed the order of the AO. On appeal by the assessee, allowing the claim of the assessee the Tribunal held that the shares were purchased by account payee cheque, transaction was credited in DMAT account, opportunity of cross-examination was not given. Accordingly the sale transaction cannot be treated as bogus merely on the basis of suspicious or surmises. Estimation of commission was also deleted. (AYs. 2013-14, 2015 -16)

    Meghraj Singh Shekhawat. v. DCIT (2019) 175 ITD 693 (Jaipur) (Trib.)

  15. S. 45 : Capital gains – sub-tenancy right-capital asset – Gains on surrender is liable to capital gains tax and not income from other sources [S. 14, 55(2), 56]

    Assessee received certain sum as consideration for transferring his sub-tenancy rights. AO assessed the same as income from other sources. CIT (A) held that the amount is assessable as capital gains. On appeal by revenue, dismissing the appeal of the revenue the Tribunal held that like tenancy right, a sub-tenancy right is also a capital asset and liable to be chargeable as capital gains and not as income from other sources. (AY. 2014-15)

    ACIT v. Dr. Jayesh Keshrichand Shah. (2019) 175 ITD 751 (Mum.) (Trib.)

  16. S. 45 : Capital gains – Retirement – Amount received as share value of assets of firm on his retirement are not liable to be taxed either as capital gains nor as business income [S. 2(14), 2(47), 28(v)]

    Allowing the appeal of the assessee the Tribunal held that amount received as share value of assets of firm on his retirement are not liable to be taxed either as capital gains nor as business income. (AY. 2012-13)

    James P. D’Silva. v. DCIT (2019) 175 ITD 533 (Mum.) (Trib.)

  17. S.45 : Capital gains – Leasehold rights – Assessable as capital gains – Cannot be claimed as exempt on the ground that it was in respect of agricultural land – Market value on allotment of land [S.48, 50C]

    Assessee had received leasehold right in a plot of land by way of an additional compensation allotted by State Government in pursuance of compulsory acquisition of agricultural land long ago in year 1965, belonging to assessee’s late father. Assessee had sold said leasehold rights for a consideration of certain amount and, accordingly, computed long term capital gains on said transfer. During course of assessment proceedings, assessee had taken an alternative plea that since original compensation was exempt from tax because of nature of land acquired being agricultural land then additional compensation received in subsequent year would also be exempt from tax. AO rejected assessee’s plea and computed capital gains on transfer of leasehold rights in property.

    Tribunal held that It was a right of assessee in a land belonging to his father against which assessee was allotted leasehold right in a plot and said right could not be considered as agricultural land transferred during year therefore, consideration received on account of transfer of such leasehold right was assessable to tax under head ‘capital gain’. (AY. 2007-08)

    Pyaribai K. Jain v. Add. CIT (2019) 175 ITD 177 (Mum) (Trib.)

  18. S. 45 : Capital gains – Long term capital gains – Lease – Entire consideration was paid when site was originally allotted in 2001 – Date of holding to be computed from the date of allotment and not from the date of absolute conveyance was made and entitle to deduction u/ s. 54F of the Act. [S. 2(42A, 2(47), 54, 54F]

    Assessee acquired a property from a building society under a lease-cum-sale agreement dated 22-3-2001. Entire consideration was paid when site was originally allotted in 2001. Absolute conveyance was made on 31-8-2014. Assessee sold the site and building on 3-12-2014 and claimed the sale as long term capital gains. AO treated the transaction as short term considering the date of conveyance i.e., 31-8-2014. On appeal the Tribunal held that date of holding to be computed from the date of allotment and not from the date of absolute conveyance was made on 31-8-2014. Followed CIT v. Dr. Shakuntala ITA No. 117 of 2006, dt. 19-9-2007 (Karn.) (HC) and CIT v. A Suresh Rao (2014) 223 Taxman 228 (Karn.)(HC). (AY. 2015-16)

    Bhatkal Ramarao Prakash. v. ITO (2019) 175 ITD 144 (Bang) (Trib.)

  19. S. 45(2) : Capital gains – Conversion of a capital asset in to stock-in-trade – Date of conversion of capital asset into stock-in-trade has to be determined either on basis of entry passed in books of account of assessee or intention of assessee to exploit capital asset as stock-in-trade for its business purpose [S.45]

    Assessee applied for permission from local authority for plan sanction in year 1994. Local authority gave permission for construction of project in year 1998. Thereupon, assessee entered into development agreement with ‘B’ developers – Since construction of project was completed in assessment year 2008-09, capital gains arising therefrom was offered to tax in said year. Assessing Officer took a view that date on which assessee had filed his application to local authority was to be taken as date of conversion of capital asset into stock-in-trade. Tribunal held that for purpose of section 45(2), date of conversion of capital asset into stock- in-trade has to be determined either on basis of entry passed in books of account of assessee or intention of assessee to exploit capital asset as stock-in-trade for its business purpose. Since assessee had filed an application before local authority in year 1994 seeking permission for development of land, Assessing Officer was right in coming to conclusion that conversion of capital asset into stock-in-trade said to have been taken place in said year itself. So far as year of taxability of capital gain was concerned, since project was completed in all respects in assessment year 2008-09 and thereupon revenue from said project had been recognised, capital gain was payable in assessment year 2008-09. (AYs. 2001-02 to 2008-09)

    Puran Ratilal Mehta v. ACIT (2019) 175 ITD 190 (Mum.) (Trib.)

  20. S. 45(4) : Capital gains – Distribution of capital asset – Retiring partner – The revaluation of asset being land held by the partnership firm which results into enhancement of value of asset and this enhanced amount credited in capital account of partners and when a retiring partner takes amount in his capital account including enhanced value of asset, it does not give rise to capital gains [S. 2(14) 45]

 There was difference of opinion amongst the members and the reference was made to third member. The two questions referred for consideration is as under:

”1. Whether on the facts and in the circumstances of case, where on revaluation of asset being land held by the partnership firm which resulted into enhancement of value of asset and this enhanced amount credited in capital account of partners and when a retiring partner takes amount in his capital account including enhanced value of asset, it gives rise to Capital Gain under section 45(4) r.w. Section 2(14) of the Income-tax Act.”

2. “Whether on the facts and in the circumstances of the case, is there any transfer of capital asset on dissolution of firm or “other wise” with in the meaning of Section 45(4) r.w. Section 2(14), in case the money equivalent is paid by partnership firm to the retiring partner and whether this money equivalent to enhances portion of the asset revalued constitutes capital asset for the purpose of Section 45(4) r.w. Section 2(14) of the Income-tax Act.”

Third member held that, the revaluation of asset being land held by the partnership firm which results into enhancement of value of asset and this enhanced amount credited in capital account of partners and when a retiring partner takes amount in his capital account including enhanced value of asset, it does not give rise to capital gains. Both the questions are answered in favour of the assessee. (ITA Nos. 3526 & 3527 MUM/2012, dt. 10-1-2019) (AYs. 2006-07 to 2007-08)

D. S. Corporation v. ITO (TM) (Mum) (Trib.) www.itatonline.org

  1. S. 47 (iii) : Capital gains – Transaction not regarded as transfer – Gift – Transfer of shares made as gift without consideration are not taxable under provisions of capital gains – Income chargeable under capital gains tax can not be assessed as income from other sources [S.45]

    Where the company is permitted by its Memorandum/Articles of Association to make a gift, transfer of shares by way of gift are valid, permissible and genuine and there is no requirement of a gift deed. Such gifts are exempt as per S. 47(iii) of the Act. Followed Prakriya Pharmacem v. ITO (2016) 238 Taxman 185 (Guj) (HC). Income chargeable under capital gains tax can not be assessed as income from other sources. (AY. 2012-13)

    Jayneer infrapower & Multiventures (P.) Ltd. v. DCIT (2019) 176 ITD 15 (Mum) (Trib.)

  2. S. 50 : Capital gains – Depreciable assets – Block of assets – Brought forward business loss and long term capital loss can be set off against short term capital gain computed under section 50 on sale of factory building being depreciable asset [S.72, 74 ]

    Dismissing the appeal of the revenue the Tribunal held that brought forward business loss and brought forward long term capital loss can be set off against short term capital gains arising as per section 50 on sale of factory building being a depreciable asset. Followed CIT v. Manali Investments [2013] /219 Taxman 113 (Mag.) (Bom) (HC). (AY. 2011-12)

    ITO v. Smart Sensors & Transducers Ltd. (2019) 176 ITD 104 (Mum.) (Trib.)

  3. S. 50B : Capital gains – Slump sale – As per sale deed, possession of only land and building was handed over and there was no transfer of furniture, fixtures and other equipments – Transaction cannot be regarded as slump sale [S. 45, 50C ]

    In return of income, the assessee-company claimed slump sale of asset of the company at ₹ 2.25 crore. However, as per the stamp valuation authority, value was adopted at ₹ 4.18 crore. The Assessing Officer adopted the value under section 50C and made addition to assessee’s income. Which was confirmed by the CIT(A). Affirming the decision of lower authorities the Tribunal held that the sale deed did not say anything about furniture and fixtures and other gadgets and also as per the deed only vacant possession of building and had been handed over by assessee and no other articles machinery etc. Accordingly the sale cannot be considered as slump sale. (AY. 2010-11)

    Manish Films (P.) Ltd. v. ITO (2019) 175 ITD 121 (Indore) (Trib.)

  4. S. 50C : Capital gains – Full value of consideration – Stamp valuation – AO is obliged to compute the capital gains by taking the valuation arrived at by the DVO in place of the actual consideration received by the assessee – The assessee is entitled to challenge the correctness of the DVO’s valuation before the CIT(A) and the Tribunal – The DVO has to be given an opportunity of hearing [S.45]

    S. 50C is a deeming provision and the AO is obliged to compute the capital gains by taking the valuation arrived at by the DVO in place of the actual consideration received by the assessee, the assessee is entitled to challenge the correctness of the DVO’s valuation before the CIT(A) and the Tribunal. The DVO has to be given an opportunity of hearing. (ITA No. 2107/ Ahd/17, dt. 1-4-2019). (AY. 2013-14)

    Lovy Ranka v. DCIT (Ahd) (Trib.), www.itatonline.org

  5. S. 50C : Capital gains – Full value of consideration – stamp valuation – The adoption of stamp valuation as the sale consideration is not justified in absence of any evidence that the sale consideration was more than the value shown in the agreement – The AO has not brought on record that the property under sale not under various encumbrances and the assessee was having the absolute marketable title of the said property – Addition is held to be not valid [S.45]

    Tribunal held that the adoption of stamp valuation as the sale consideration is not justified in absence of any evidence that the sale consideration was more than the value shown in the agreement. The AO has not brought on record that the property under sale was not under various encumbrances and the assessee was having the absolute marketable title of the said property. Addition is held to be not valid. (ITA No. 2243/Mum/2015, dt. 8-3-2019) (AY. 2011-12)

    Sir Mohd. Yusuf Trust v. ACIT (Mum)(Trib.), www.itatonlie.org

  6. S. 54F : Capital gains – Investment in a residential house – Belated construction or possession would not be a ground to deny claim of exemption – Two separate flats purchased by assessee had two separate entrances, treated as one residential house – Entitled to exemption [S.45]

    Dismissing the appeal of the revenue the Tribunal held that belated construction or possession would not be a ground to deny claim of exemption. Two separate flats purchased by assessee had two separate entrances, treated as one residential house. Entitled to exemption. (AY. 2013-14)

    ITO v. Saroj Rani Gupta (Smt.) (2019) 176 ITD 109 (Kol.) (Trib.)

  7. S.54F : Capital gains – Investment in a residential house – Construction activities of the new house started before the date of sale of original asset – Beneficial provision and should be liberally interpreted – Entitle to exemption [S. 45]

    Allowing the appeal of the assessee, Tribunal held that an assessee who has purchased a house property is entitled to exemption u/s. 54F despite the fact that construction activities of the new house has started before the date of sale of the original asset. Beneficial provision and should be liberally interpreted. (Followed CIT v. Bharti Mishra (2014) 265 CTR 374 (Delhi) (HC) & CIT v. Kuldeep Singh (2014) 270 CTR 561 (Delhi)(HC) followed) (ITA No. 2630/Del/2015, dt. 30-4-2019)(AY. 2011-12)

    Kapil Kumar Agarwal v. DCIT (Delhi)(Trib), www.itatonline.org

  8. S. 54F : Capital gains – Investment in a residential house – Capital Gains Scheme Account – Bank account was opened only for the purpose of depositing compensation received in his hand and the amount was utilised for purchase of plot of land and partial construction thereon – Entitle to exemption [S.45]

    Assessee received certain compensation on compulsory acquisition of his land by RIICO. In return of income, assessee offered said receipts to tax as long term capital gains and claimed exemption under section 54F on account of sale consideration deposited in Capital Gain Account Scheme 1988. AO held that the said account was not a Capital Gain Scheme Account and, therefore, denied exemption under section 54F of the Act. On appeal the Tribunal held that the entire compensation stood deposited in savings bank account maintained with HDFC bank which was opened specifically for purpose of depositing compensation received by assessee and withdrawals had been limited to extent of purchase of plot of land and partial construction. Therefore, assessee’s claim for deduction under section 54F could not have been denied on ground that amount of compensation received had not been deposited in Capital Gains Account. Further, fact that said bank account of assessee was attached by Department, there was no way assessee could have met deadline for constructing new house, being three years from date of transfer of original asset. Accordingly claim of deduction was allowed. (AY. 2009-10)

    Goverdhan Singh Shekhawat. v. ITO (2019) 175 ITD 272 (Jaipur) (Trib.)

  9. S. 54F : Capital gains – Investment in a residential house – Investment in single house but bifurcated with two door numbers for ground and first floor – New house purchased in the joint name of wife and son entitled to deduction – Property need not be purchased by assessee in his own name for claiming exemption [S. 2 (47), 45]

    Assessee sold a house site in previous year and invested sale proceeds in another property and claimed exemption under section 54F. AO disallowed the claim on the ground that as per description of property purchased by assessee it consisted of two doors and he was of view that assessee purchased two house properties, hence could not be allowed deduction under section 54F. On appeal Tribunal held that entire property constituted single house but was bifurcated with two door numbers for ground and first floor with common entrance in ground floor only to earmark share of beneficiaries. Accordingly entitle to deduction. Tribunal also held that for claiming deduction of capital gains under section 54F, new residential house need not be purchased by assessee in his own name. Assessee purchased new house in joint names of himself, his wife and son, he would be entitled to benefit of deduction under section 54F. (AY. 2015-16)

    Bhatkal Ramarao Prakash. v. ITO (2019) 175 ITD 144 (Bang) (Trib.)

  10. S. 56 : Income from other sources – Fair Market Value – DCF method – Closely held company – The fact that the company is loss-making does not mean that shares cannot be allotted at premium. The DCF method is a recognised method though it is not an exact science & can never be done with arithmetic precision. The fact that future projections of various factors made by applying hindsight view cannot be matched with actual performance does not mean that the DCF method is not correct [S. 56(2)(viib), Rule 11UA.]

    The fact that the company is loss-making does not mean that shares cannot be allotted at premium. The DCF method is a recognised method though it is not an exact science & can never be done with arithmetic precision. The fact that future projections of various factors made by applying hindsight view cannot be matched with actual performance does not mean that the DCF method is not correct. (ITA Nos. 6453 & 6454/Del/2018, dt. 15-3-2019) (AY. 2013-14 and 2014-15)

    India Today Online Pvt. Ltd. v. ITO (Delhi)(Trib), www.itatonline.org

  11. S. 56 : Income from other sources – Share premium – For purpose of sub-rule (2) of Rule 11UA, an auditor cannot be accountant of assessee-company [S.44AB, 56(2) (viib), 288(2)]

    For purpose of sub-rule (2) of rule 11UA, an auditor cannot be accountant of assessee- company, therefore, where person who valued shares of assessee-company was none other than person who signed audit report under section 44AB. Assessing Officer was justified in ignoring valuation report submitted by assessee and determining fair market value on basis of NAV. Share of ₹ 10 was valued at ₹ 400 i.e. Premium of ₹ 390 was rejected. Tribunal also observed that share was valued at ₹ 100 per share as on 2-2-2012 and on 15-11-2013 at ₹ 400 per share. (AYs. 2014-15, 2015-16)

    Kottaram Agro Foods (P.) Ltd. v. ACIT (2019) 175 ITD 159 (SMC) (Bang) (Trib.)

  12. S. 68: Cash credits – Share Capital – identity, creditworthiness and genuineness of the share applicants by producing the PAN details, bank account statements, audited financial statements and Income Tax acknowledgments and the investors have shown the source of source & personally appeared before the AO in response to s. 131 summons – Addition cannot be made as cash credits [S. 131, 133(6)]

    AO made contribution to share capital of the assessee as cash credits, which was affirmed by the CIT(A). On appeal by the assessee the allowing the appeal the Tribunal held that the assessee has discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants by producing the PAN details, bank account statements, audited financial statements and Income Tax acknowledgments and the investors have shown the source of source & personally appeared before the AO in response to s. 131 summons. The judgement in PCIT v. NRA Iron & Steel (2019) 103 taxmann.com 48 (SC) is distinguished on facts stating that in the said decision the AO had made extensive enquiries and from that he had found that some of the investor companies were non-existent which is not the case in the assessee.) (ITA. No. 1494/ Kol/2017, dt. 5-4-2019)(AY. 2012-13)

    Baba Bhootnath Trade & Commerce Ltd. v. ITO (Kol.)(Trib), www.itatonline.org

  13. S. 68: Cash credits – Bank statement cannot be considered as books maintained by assessee – Addition is held to be not valid.

    Allowing the appeal of the assessee the Tribunal held that,Bank statement cannot be considered as books maintained by assessee. According the addition as cash credit was deleted. Followed CIT v. Bhaicahnd H. Gandhi (1983) 143 ITR 67 (Bom) (HC), Mehul Vyas v. ITO (2017) 164 ITD 296 (Mum) (Trib). (AY 2008-09)

    Satish Kumar v ITO (2019) 198 TTJ 114/ 175 DTR 121 (Asr) (Trib)

  14. S.68: cash credits – Bank statement is not books of account Sale of shares – Addition on the basis of bank statement treating the statement as books of account is held to be not valid – Natural justice – Statement of third parties cannot be relied upon without giving an opportunity of cross examination. [S.2(12A, 44AA, 45, 69, 69A, 143(3)]

    AO assessed the long term capital gains on sale of shares as cash credit u/s 68 of the Act and alleged commission u/s 69C of the Act on the basis of bank statement issued by the Bank which was confirmed by the CIT(A). On appeal the Tribunal held that addition on the basis of bank statement treating the statement as books of account is held to be not valid. Tribunal also held that statement of third parties cannot be relied upon without giving an opportunity of cross examination. Accordingly addition was deleted. Referred. Sheraton Apparels v. ACIT (2002) 256 ITR 20 (Bom) (HC) (AY. 2015-16)

    Amitabh Bansal. v. ITO (2019) 175 ITD 401 (Delhi) (Trib.)

  15. S. 68 : Cash credits – Bogus Share Capital – Merely presenting of documents & making payment through bank or appearance by director before the AO & admitting fact of share application made is in itself not sufficient to justify the genuineness of the transaction – It is against human probability that anyone will invest and pay share premium in a company without net worth or future prospectus – All applicants with common address are being controlled remotely by one person. These applicants are all paper companies not having sufficient worth and created for providing entries of share application money or share capital or loans by way of accommodation entries – Credit worthiness is not established – Addition is held to be justified.

    Allowing the appeal of the revenue the Tribunal held that merely presenting of documents & making payment through bank or appearance by director before the AO & admitting fact of share application made is in itself not sufficient to justify the genuineness of the transaction. It is against human probability that anyone will invest and pay share premium in a company without net worth or future prospectus. All applicants with common address are being controlled remotely by one person. These applicants are all paper companies not having sufficient worth and created for providing entries of share application money or share capital or loans by way of accommodation entries. Creditworthiness is not established. Addition is held to be justified. (Followed PCIT v. NDR Promoters Pvt. Ltd. (2019) 410 ITR 379 (Delhi) (HC) & PCIT v. NRA Iron & Steel Pvt. Ltd. 2019) 103 Taxmann.com 48 (SC) followed). (ITA No. 4778/Del/2013, dt. 8-3-2019)(AY. 2006-07).

    ITO v. Synergy Finlease Pvt. Ltd. (Delhi)(Trib.), www.itatonline.org

  16. S. 80IB : Industrial undertakings – Ownership of property is not a condition for claiming deduction

    On appeal by the Department, the Tribunal relying on the decision of the Hon’ble Gujarat High Court in the case of CIT v. Radha Developers (2012) 341 ITR 403 (Guj) (HC) held that ownership of land was not a prerequisite for claiming deduction u/s. 80IB of the Act and therefore, deduction was allowable. (AY. 2007-08, 2010-11)

    DCIT v. AG8 Ventures Ltd. (2019) 69 ITR 35 (SN) (Indore) (Trib.)

  17. S. 80IB(10) : Housing projects – Obtaining occupation certificate is not a mandatory requirement in order to ascertain whether building was completed or not for purpose of deduction under section 80-IB(10)

    Tribunal held that the occupation certificate is not a mandatory requirement in order to ascertain whether building was completed or not for purpose of deduction under section 80-IB(10). (AYs. 2001-02 to 2008-09)

    Puran Ratilal Mehta v. ACIT (2019) 175 ITD 190 (Mum.) (Trib)

  18. S. 80IC : Special category States – Manufacture – Wooden Sleepers and planks made into planks – Amounts to manufacture – Entitled to deduction [S. 2(29BA)]

    Tribunal held that original products used by the assessee were wooden planks, evafoam, thermocol, adhesive tape, pneumatic, stapler pins, and nails. The final product obtained in the process by the assessee was wooden crates which were a distinct and separate article different from all the products that went into the manufacture and was recognised as a distinct product by the Central Excise and value added tax classification which had assigned the product a specific code and serial number respectively in the Central Excise and value added tax Schedules. In terms of the Uttarakhand Value Added tax Act, 2005, wooden crates were recognized as a distinct product and item. Similarly the assessee had been registered as manufacturer with the District Industries Centre and registered as a factory under the Factories Act. The assessee had been granted exemption from excise duty which was only granted to manufacturing units. The term as defined by section 2(29BA) would include any activity that results in the creation of an article or object that was new and distinct from the raw material that went into its manufacture and having a different name, character, use and/ or integral structure. The wooden crates were completely distinct from the planks, nails, fevicol, foam etc. that were used to make them and they had a use of their own. The change brought in the wooden planks by hand by the labourers using small cutters would amount to manufacture of a product, the wooden crates, by the assessee. Further when four Departments of the Government had considered the assessee a manufacturing unit, another Department of the Government could not take a contrary view or a view inconsistent with the view taken by the other Departments of the Government. (AY. 2012-13)

    ITO v. Rudra Woodpack P. Ltd. (2019) 70 ITR 169 (Delhi) (Trib)

  19. S. 90 : Double taxation relief – Interest – Royalty – Levy of surcharge and 3% education cess on tax computed – Held to be not valid – DTAA – India – UAE [Art. 2(1), 11, 12 ]

    Allowing the appeal of the assessee the Tribunal held that Article 2(1) of the India-UAE DTAA provides that the taxes covered shall include tax and surcharge thereon. Education cess is nothing but an additional surcharge & is also covered by the definition of taxes. The Tribunal held that the provisions of India-UAE Double Taxation Avoidance Agreement are pari materia with the provisions of India-Singapore DTAA, which was subject matter of consideration in DIC Asia Pacific Pte Ltd v. ADIT (2012) 18 ITR 358 (Kol) (Trib). Accordingly the appeal of the assessee is allowed. Tribunal also referred following cases in support, Capgemini SA v. Dy.CIT (IT)-2 (1) [13-7-2016] [2016] 72 taxmann.com 58 (Mum.) (Trib.)Dy. DIT v. J. P. Morgan Securities Asia (P.) Ltd[23-10-2013] [2014] 42 taxmann.com 33 (Mum.) (Trib.), Dy.DIT (IT)-1(1) v. BOC Group Ltd. [30-11-2015] [2015] 64 taxmann.com 386 (Kol)(Trib.), Everest Industries Ltd. v. JCIT [31-1- 2018], [2018] 90 taxmann.com 330 (Mum)(Trib.), Soregam SA v. Dy.DIT(IT) [30-11-2018] [2019] 101 taxmann.com 94 (Delhi) (Trib.), and Sunil V. Motiani v. ITO (IT)(1) [27-02-2013] [2013] 33 taxmann.com 252 (Mum) (Trib.). (ITA No. 2043/ Hyd/18, dt. 29.03.2019)(AY. 2012-13)

    R. A. K. Ceramics v. DCIT(2019) 176 DTR 345/ 199 TTJ 273 (Hyd.)(Trib.), www.itatonline.org

  20. S. 92C Transfer pricing – It is mandatory for the AO to determine the arm’s length price (ALP) of the international transactions by following one of the prescribed methods – He is not entitled to follow any other method or to resort to estimation – The failure
    – to follow one of the prescribed methods makes the entire transfer pricing adjustment unsustainable in law – The legal infirmity cannot be cured by restoring the issue to the TPO – The TPO cannot be allowed another innings to rectify the mistake [S.254(1)]

    Tribunal held that, it is mandatory for the AO to determine the arm’s length price (ALP) of the international transactions by following one of the prescribed methods. He is not entitled to follow any other method or to resort to estimation. The failure to follow one of the prescribed methods makes the entire transfer pricing adjustment unsustainable in law. The legal infirmity cannot be cured by restoring the issue to the TPO. The TPO cannot be allowed another innings to rectify the mistake. (ITA No. 1182/MUM/2017, dt. 16-1-2019)(AY. 2012-13).

    CLSA India Private Ltd v. DCIT (Mum.)(Trib.), www.itatonline.org

  21. S. 115A : Foreign companies – Tax – Royalty – In terms of technology license agreement entered into by assessee an Italy based company with its Indian AE effective from 1-4-2008, being covered by sub- clause (AA) of section 115A(1)(b), rate of tax on royalty received by assessee will be 10.50 per cent – DTAA – India-Italy [S.90(2), 195A]

    Tribunal held that rate of tax on Royalty on three wheelers received by assessee an Italy based company from its Indian AE, pursuant to technology licence agreement entered between assessee and its AE in India, effective from 1-4-2008, being covered by sub-clause (AA) of section 115A(1)(b), will be 10.50 per cent.

    Piaggio & C.S.P.A. v. DIT (2019) 175 ITD 304 (Pune) (Trib.)

  22. S.115JB: Book profit – Not following the Accounting Standard – AO Must modify the book profit as per Accounting Standards as per provisions of Companies Act

    Dismissing the appeal of the assessee the Tribunal held that AO must modify book profit for computation of MAT in case company has not followed Accounting Standards as per provisions of Companies Act. (AY. 2013-14)

    Gati Ltd. v. ACIT (2019) 175 ITD 310 (Hyd.) (Trib.)

  23. S. 133A : Power of survey – Sworn statement – Addition cannot be made only on the basis of statement of managing director recorded u/s. 131 during survey, without any corroborative evidence. [S. 131, 132(4), 143(3), Evidence Act, 1878, S. 18]

    Dismissing the appeal of the revenue the Court held that addition cannot be made only on the basis of statement of managing director recorded u/s 131 during survey, without any corroborative evidence. Assessing Officer could not make additions to income of assessee-company only on basis of sworn statement of its managing director recorded under section 131 during course of survey without support of any corroborative evidence. Circular CBDT Circular in F. No. 286/98/2013-IT (Inv.II) dated 18-12-2014. (AY. 2014 -15)

    ITO v. Toms Enterprises (2019) 175 ITD 607 (Cochin) (Trib.)

  24. S. 153 : Assessment – Limitation – Order of assessment passed within time but dispatched after expiry of time limit, Assessment held to be barred by limitation [S. 153(2A)

    The Assessment Order was passed on December 30, 2011 (i.e. within the time limit of passing order), however, the same was dispatched on January 09, 2012 (i.e., after the time limit of passing order). The assessee contended that the order passed by the AO is barred by limitation as the same was dispatched after the time limit. The Ld. CIT(A) held that the order of assessment was within time. On an appeal to Tribunal, the Tribunal held that the date of dispatch of the order of assessment was to be construed as the date of the order of assessment and therefore, the order of assessment was held to be barred by limitation. (AYs. 2001-02 to 2003-04).

    Globe Transport Corporation v. ACIT (2019) 69 ITR 69 (SN) (Bang.)(Trib.)

  25. S. 194C : Deduction at source – Contractors – Payments to artists – Participation in reality show – Payments made do not fall with in the ambit of S. 194J as professional fees – [S. 194J, 201(1)] 

    Allowing the appeal of the assessee the Tribunal held that payments to various artists like singers, musicians etc who participated in reality shows hosted by it as guests or judges, tax was required to be deducted rightly deducted tax at source under S. 194C and provisions of S.194J is not applicable hence ley of interest is not valid. (AY. 2010-11)

    Malayalam Communications Ltd. v. ITO (2019) 175 ITD 433 (Cochin) (Trib.)

  26. S. 201: Deduction at source – Shortfall in deposit of TDS – Adjusted against the excess deposit in earlier years – No interest u/s. 201(1A) – Net result after adjustment is excess deposit of TDS by assessee [S. 201(IA), 245]

    Assessee made ad hoc payment of TDS on estimated basis. On finalisation of bills of the contractors and sub-contractors, the actual TDS liability was determined. Thus, there was shortfall in payment of TDS for some years and excess deposit for some years. The AO did not adjust the excess deposit against the shortfall and raised the demand including interest u/s. 201(1A) of the Act. The Tribunal held that the stand taken by revenue was contrary to the communication issued by the CPC (TDS) which stated that excess deposit of TDS can be adjusted against the shortfall. The Tribunal further relied on Section 245 of the Act and held that the assessee was entitled for adjustment of the excess deposit of TDS made in earlier year against the TDS payable for subsequent years and directed the AO to recompute the amount payable/refundable to the assessee.

    Steel Authority of India Ltd v. DCIT (TDS) (2019) 69 ITR 88 (SN) (Kol.)(Trib.)

  27. S. 201 : Deduction at source – Failure to deduct or pay – Date of tendering of cheque for payment of Government dues could be deemed to be date of payment of tax – Delay in remittance of said amount to Government account by Bank, no interest can be levied [S. 201(IA)]

    Tribunal held that for purpose of levy of interest under section 201(1A) for late deposit of TDS, date of tendering of cheque for payment of Government dues could be deemed to be date of payment of tax and where bank causes delay in remittance of said amount to Government account, no interest can be levied under section 201(1A) from assessee. Followed CIT v. K. Kalpana Saraswathi v. P. S. S. Somasundram Chettiar 1980 AIR 512 (SC) CBDT Circular No. 261 [F. No. 385/61/79-IT (B)], dated 8-8-1979, date of tendering of cheque for payment of Government dues would be deemed to be the date of payment of such taxes. The aforesaid CBDT circular was applicable to all Government dues, and made no distinction whether the payment was by way of TDS, advance tax, self- assessment tax etc. (AY. 2008-09)

    Oil and Natural Gas Corporation Ltd. v. DCIT (2019) 176 ITD 124 (Mum.) (Trib.)

  28. S. 201 : Deduction at source – Failure to deduct or pay – limitation – Non-residents – Additional grounds – Royalty – Fee for technical services – In cases of payments made to non-residents, an order passed after one year from the end of the financial year in which the proceedings were initiated is void ab initio and liable to be quashed [S. 9(1)(vi), 9(1)(vii), 201(1) 201(3) 201(4), 254(1)]

    Appellate Tribunal admitted additional grounds on limitation. Referred Special Bench Mahindra & Mahindra Ltd v. Dy. CIT (2009) 122 TTJ 577/(2010) 122 ITD 216 (SB)(Mum) (Trib) affirmed in DIT(IT) v. Mahindra & Mahindra Ltd. (2014) 365 ITR 560 (Bom) (HC). The AO passed the order dt. 6-2-2014 where as the order should have been passed on or before 31-03 2013 i.e. with in one year from the end of the financial year in which proceedings u/s. 201 are initiated. Tribunal held that since, the order is beyond the period of limitation the same is void ab initio and subsequent proceedings arising there form are vitiated. The departmental representative argued that the time limit specified in S. 201(3) & 201(4) for passing orders does not apply to cases where payments are made to non-residents. Allowing the appeal and additional grounds the Tribunal held that in cases of payments made to non-residents also an order passed after one year from the end of the financial year in which the proceedings were initiated is void ab initio and liable to be quashed. As the order passed by the AO u/s. 201(1) and 201(IA) is held to be void-ab initio, the subsequent proceedings arising therefrom are vitiated and the appeals of the revenue are dismissed. (ITA Nos. 1669, 1670 & 1671/PUN/2014, dt. 5-4-2019) (AYs. 2008-09, 2009-10, 2010-11)

    Atlas Copco (India) Ltd v. DCIT (Pune)(Trib.), www.itatonline.org

  29. S. 251 : Appeal – Commissioner (Appeals) – Powers – CIT(A) is not empowered to dismiss appeal for non-prosecution and is obliged to dispose of appeal on merits by passing a speaking order [S.250]

    Tribunal held that when an appeal is filed, Commissioner (Appeals) is duty bound to dispose of appeal through a speaking order on merits on all points which arose for determination in appellate proceedings, including on all grounds of appeal. Accordingly CIT(A) is not empowered to dismiss appeal for non-prosecution and is obliged to dispose of appeal on merits. Matter remanded. Followed CIT v. Premkumar Arjundas Luthra (HUF) (2016) 240 taxman 133 (Bom)(HC) (AY. 2011-12)

    Swati Pawa (Ms.) v DCIT (2019) 175 ITD 622 (Delhi) (Trib.)

  30. S. 254(2): Appellate Tribunal – Rectification of mistake apparent from the record – Penalty – Though the High Court observed that Tribunal’s decision of reducing the penalty as a “way to bypass the minimum limit” and the Tribunal was in error in granting the relief, the same does not constitute a “mistake apparent from the record” so as to enable the Tribunal to revisit its decision [S.271(1)(c)]

    Dismissing the miscellaneous application of the Revenue the Tribunal held that though the High Court faulted the Tribunal’s decision of reducing the penalty as a “way to bypass the minimum limit” and the Tribunal was in error in granting the relief, the same does not constitute a “mistake apparent from the record” so as to enable the Tribunal to revisit its decision. (MA No. 166/Ahd/18 Arising out of ITA No.: 210/ Ahd/15, dt. 3-4-2019)(AY. 2010-11)

    ITO v. Devendra J. Kothari(2019) 176 DTR 289/ 199 TTJ 1 (Ahd.)(Trib.), www.itatonline.org

  31. S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Strictures – The insinuation of the Dept that ITAT passes order in a state of oblivion displays a totally irresponsible and cavalier approach on the cusp of contempt and deserving exemplary cost to purge the same. Referring in a deriding manner that the ITAT started with the grounds of appeal, displays the naiveté of revenue authority purporting to be critical examiner of ITAT verdict, which is uncalled for – I express deep anguish at this approach of the department and hope that revenue will disband this cavalier and naïve approach while insinuating about the functioning of the ITAT without verifying their record [S. 147]

    The Tribunal held that the insinuation of the Dept that ITAT passes order in a state of oblivion displays a totally irresponsible and cavalier approach on the cusp of contempt and deserving exemplary cost to purge the same. Referring in a deriding manner that the ITAT started with the grounds of appeal, displays the naiveté of revenue authority purporting to be critical examiner of ITAT verdict, which is uncalled for. I express deep anguish at this approach of the department and hope that revenue will disband this cavalier and naïve approach while insinuating about the functioning of the ITAT without verifying their record. (M.A. Nos. 605 & 606/Mum/2018, dt. 22-2-2019) (AY. 2003-04 & 2004-05)

    ITO v. Rayoman Carriers Pvt. Ltd.(Mum.)(Trib.), www.itatonline.org

  32. S. 254(2): Appellate Tribunal – Rectification of mistake apparent from the record – Employees of statutory corporations cannot be regarded as employees of State or Central Government – Failure to deduct tax at source under bona fide belief – Held not liable to pay penalty – AO filed miscellaneous application – Held miscellaneous application is not maintainable – Tribunal cannot recall its previous order in an attempt to rewrite the same [S.10(10AA) 192, 201(1), 201(IA)]

    On appeal filed before the Tribunal, the assessee contended that the provisions of section 201(1) and 201(1A) were not attracted because the non deduction of tax at source by KPTCL was under the bona fide belief that it was not obliged to deduct tax at source on payments in excess of ₹ 3 lakh towards unutilised leave period as it believed that its employees were employees of State Government. The Tribunal held that the obligation of the assessee was only to make a bona fide estimate of the salary. In the facts and circumstance of the instant case, the assessee had made such an estimate. The assessee’s obligation under section 192 was, therefore, properly discharged and hence proceedings under section 201(1) and 201(1A) were quashed. Revenue filed miscellaneous petition against the impugned order of the Tribunal quashing the orders under sections 201(1) and 201(1A). The Tribunal in its order referred to several decisions wherein it has been held that estimate of income under the salary, if it is bona fide, then the payer cannot be treated as an ‘assessee-in-default’. Therefore, there is no merit in allegations in the miscellaneous petition. Besides the above, there is also an allegation that the revenue was prevented from assisting the Bench by differentiating the cases relied by the assessee on the contention of the assessee that it was a state. As already said, the Tribunal has already accepted the contention of the revenue that the assessee is not a State. The allegations that the revenue was prevented from arguing is, therefore, not correct for the reason the argument was accepted by the Tribunal. (AY. 2013-14)

    ITO (OSD) (TDS) v. Karnataka Power Transmission Corpn. Ltd. (2019) 175 ITD 130 (Bang.) (Trib.)

  33. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Reassessment – Invalid reassessment order cannot be revised – Revision u/s. 263 cannot be made if reassessment u/s. 147 was invalid, as reassessment was made without issue of notice u/s. 143(2) [S.143(2), 147]

    Original return of Income was filed on 20-10-2007 at NIL income. The notice under section 148 of the Income-tax Act, was issued on 25-3-2014 after recording the reasons and taking prior approval from the competent authorities. The assessee in response to the statutory notice vide letter dated 10-4-2014 submitting therein that the original return filed may please be treated as return filed in response to the notice under section 148 of the I.T. Act and also requested to provide reasons recorded, which were duly provided to it. The assessee also filed its objections which were disposed off. The AO issued statutory notice which were complied by the assessee and filed details as called for. The AO after discussing the case with the assessee, accepted the returned income and completed the reassessment order under section 147/143(3) of the I.T. Act, 1961, dated 30-6-2014. The Ld. Pr. CIT also noted that as there is no statutory notice under section 143(2) prescribed in the Act and only non-statutory notice is prescribed, the purpose of which is to intimate the assessee that the case has been selected for scrutiny and the notices issued on dated 11-6-2014 and 19-6-2014 clearly proves that the case of the assessee has been selected for scrutiny, such show cause notices are nothing but notice under section 143(2). of the I.T. Act. It is also noted by the Ld. Pr. CIT that even though no formal notice under section 143(2) was issued by the AO, in the letters dated 11-6-2014 and 19-6-2014 it was specifically mentioned that in the absence of the requisite details the assessment would be completed under section 144 of the I.T. Act. The AO has not examined this issue in the light of seized material. Therefore, re-assessment order was found to be erroneous in so far as prejudicial to the interests of the Revenue because AO failed to look into the seized material. The Order was set aside and restored to the file of AO with a direction to examine the seized material and confront the same to the assessee and pass the order in accordance with law. On appeal the Tribunal held that as notice under section 143(2) was not issued, the reassessment order is invalid, bad in law and non-est and an invalid reassessment order cannot be revised under section 263 of the Act. (AYs. 2007-08, 2009-10)

    Supersonic Technologies Pvt. Ltd. v. PCIT (2019) 175 DTR 30/ 69 ITR 585 / 197 TTJ 889 (Delhi) (Trib.)

    Superior Buildwell P. Ltd v. PCIT (2019) 175 DTR 30/ 69 ITR 585 / 197 TTJ 889 (Delhi)(Trib)

  34. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Reassessment – Merger – Since the second round of reassessment proceedings were on the same set of facts as the first round, the same were dropped by the AO and thus the first reassessment order stood merged with the second – Thus, the said order cannot be revised under Section 263 of the Act since only the valid reassessment order can be revised [S.143(1), 147, 148 ]

    Assessee filed return of income and was processed under Section 143(1) of the Act. Subsequently the case was reopened under Section 147 on the allegation of accommodation entry taken. The AO after due enquiry accepted the returned income vide reassessment order. The assessee’s case was again reopened under Section 147 based on the same reasons for reopening as issued during first reassessment proceedings. Subsequently, the AO issued order dropping the said reassessment proceedings. The Principal CIT initiated revision proceedings under Section 263. The Tribunal held that the since the second round of reassessment proceedings were on the same set of facts as the first round, the same were dropped by the AO and thus the first reassessment order stood merged with the second. Thus, the said order cannot be revised under Section 263 of the Act since only the valid reassessment order can be revised. (AY. 2009-10)

    Sri Balaji Forgings (P) Ltd. v. PCIT (2019) 175 DTR 57 / 197 TTJ 915 (Delhi.)(Trib.)

  35. S. 263 : Commissioner – Revision of orders prejudicial to revenue – unsold flats held as stock in trade – Notional value – In view of contrary decisions of High Court, issue as to whether notional income on unsold flats held by assessee–builder as stock-in-trade in its books of account should be assessed as income from house property is a debatable issue, and hence order of Assessing Officer for not bringing unsold flats to tax at notional letting value under head ‘Income from Other Sources’ which was one of possible views – Revision is not valid [S.22, 23 28(i)]

    Allowing the appeal of the assessee the Tribunal held that In view of contrary decisions of High Court, issue as to whether notional income on unsold flat held by assessee-builder as stock-in- trade in its books of account should be assessed as income from house property is a debatable issue, and hence order of Assessing Officer for not bringing unsold flats to tax at notional letting value under head ‘Income from Other Sources’ which was one of possible views- Revision is not valid. CIT v. Ansal Housing Finance & Leasing co. Ltd. (2013) 354 ITR 180 (Delhi) (HC)Neha Builders (P.) Ltd. (2007) 164 Taxman 342 (Guj) (HC) (AY. 2013-14)

    S.D. Corporation (P.) Ltd. v. PCIT (2019) 175 ITD 164 (Mum) (Trib.)

  36. S. 271AAB : Penalty – Search initiated on or after 1st July, 2012 – Levy of penalty is not mandatory – Merely on the basis of surrender the levy of penalty is not justified. As regards cash found in the Course of search which was not disclosed in the books of account, levy of penalty was confirmed

    Levy of penalty under S. 271AAB is not based on addition made and investigation/enquiry conducted during the course of assessment proceedings, rather it is based on search conducted on the assessee. Even if it is assumed that primary charge of undisclosed income has to be read along with ancillary conditions, where the AO has not stated the specified charge at the time of initiation of penalty proceedings, such uncertain charge at the stage of initiation of penalty proceedings can be made good with a clear cut charge in the penalty order. Merely on the basis of surrender the levy of penalty is not justified. As regards cash found in the course of search which was not disclosed in the books of account, levy of penalty was confirmed. (AY. 2014-15)

    Rambhajo’s v ACIT (2019) 198 TTJ 142/ 175 DTR 161 (Jaipur) (Trib)

  37. S. 271B : Penalty – Failure to get accounts audited – Accommodation entries – Gross amount received to be considered for computing monetary limits of ₹ 40 lakh and not the commission earned by him – levy of penalty is held to be justified [S. 44AB]

Dismissing the appeal of the assessee the Tribunal held that assessee, engaged in providing accommodation entries to entry seekers on commission basis, gross amount received had to be taken into consideration for computing monetary limit of ₹ 40 lakhs as specified under section 44AB and not commission income earned by him. Accordingly the levy of penalty is held to be justified. (AY. 2002-03, 2006-07, 2007-08)

Mukesh Choksi v. ACIT (OSD) (2019) 175 ITD 394 (Mum) (Trib.)   

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