Research Team

1. S. 2(22)(e): Deemed dividend – Capital contribution by companies in which assessee Firm’s partners were shareholders – Commercial Transaction – Not loans and advances – Not assessable as deemed dividend. [S. 260A]

   During the year under consideration, the assessee-partnership firm received capital contributions from two partner-companies in which two other partners held substantial interest. The assessee was neither a registered shareholder nor a beneficial owner of shares held in the companies. However, the assessing officer assessed the contributions as deemed dividend under section 2(22)(e) and taxed the same in the hands of assessee. The Commissioner of Income-Tax (Appeals) held that the capital contribution could not be treated as loans or advances extended to the assessee and therefore, the assessing officer could not have treated the same as deemed dividend in the hands of the assessee and the same has been upheld by the Hon’ble Tribunal. On appeal by the Department, the Hon’ble Delhi High Court held that capital contribution made by the two partner-companies could not be treated as a loan or advance extended to assessee and therefore, addition could not be made in hands of assessee. Further, if at all addition could have been made, it could’ve been in hands of two individual partners and that too only by their assessing officers after affording them an opportunity of being heard.(AY. 2006-07, 2010-11)PCIT v. Wig Investment (2024) 461 ITR 117 / 158 taxmann.com 379 (Delhi HC)

2. S. 9(1)(i): Income deemed to accrue or arise in India – Business connection – Business profits – Composite contract – Service rendered and payment received outside India – Income earned on account of offshore supplies was not taxable – DTAA-India – South Korea.[S. 234B, 260A, Art. 7]

   Dismissing the appeal of the Revenue the Court held that, though assessee had entered into a contract with MRVC for the supply of equipment and services, offshore as well as onshore, the terms of the contract distinctly set out the quantum of offshore supplies to be made by the assessee to MRVC and also the quantum of payment to be received by the assessee from MRVC outside India. The composite contract specifically records the quantum of goods to be supplied outside India, the property in the plant and machinery got transferred to MRVC once they were loaded on the mode of transport from the country of origin to India and even the payment is made outside India. Therefore the income arising from offshore supplies is not taxable in India. (AY. 2012-13)CIT (IT) v. Iljin Electric Co. Ltd (2024) 296 Taxman 516 (Bom)(HC)

3. S. 9(1)(i): Income deemed to accrue or arise in India – Business connection – Business profits – Disallowed engineering fees on the ground that time log sheets were not filed, debit notes furnished provided sufficient information as to nature of duties and number of hours spent – Order of Tribunal deleting the disallowance is affirmed – Article 7 of OECD Model Convention. [S. 260A]

   Dismissing the appeal of the Revenue the Court held that, the involvement of the assessee in the project which was under execution is not in doubt. The DMRC had availed the engineering services rendered by the employees of the head office. The assessee only remitted the engineering fee to the head office. There is no dispute with regard to the fact that the debit note provided sufficient information not only concerning the names of the employees but also as to the nature of duties and number of hours that they spent on the job assigned to them. The Tribunal being the final fact-finding authority, hence no interference was called for, especially when revenue had not proposed any question which was indicative of the fact that any of the findings returned by the Tribunal was perverse. Therefore Disallowance was correctly deleted. (AY. 2005-06)CIT (IT) v. Cobra Instalaciones Y Servicios S.A. (2024) 296 Taxman 287 (Delhi)(HC)

4. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Income of supply of CAS and middleware products by the Switzerland company to Indian customers – Does not fall within the ambit of ‘royalty’ as defined in section 9(1)(vi) as well as DTAA – Not liable to deduct tax at source – DTAA-India- Switzerland. [S.195, 260A, Art. 12(3)]

   Dismissing the appeal of the Revenue the Court held that income of a Switzerland-based company from supply of CAS and middleware products to Indian customers did not fall under ‘royalty’ as defined under section 9(1)(vi) and article 12(3) of India-Swiss DTAA and thus, same did not give rise to any income taxable in India. Not liable to deduct tax at source. Order of Tribunal is affirmed. (AY. 2017-18)CIT (IT) v. Nagravision S. A. (2023) 157 taxmann. com 457/ (2024) 461 ITR 143 (Delhi)(HC) Editorial : SLP of Revenue is dismissed, CIT (IT) v. Nagravision S. A (2024) 297 Taxman 65/ 461 ITR 146 (SC)

5. S. 9(1)(vii): Income deemed to accrue or arise in India – Fees for technical services – Subscription fee – From members Non-commercial objectives, professional practices, and articles did not reflect any element of commerciality, subscription fee would not be in nature of FTS-Also exempt on principle of mutuality – DTAA- India – Switzerland. [S.4, 260A, Art. 6.2(a), 6(2)(b), 7.5, 12]

   Dismissing the appeal of the Revenue the Court held that, it was found from articles of the assessee that all member firms contributed to a common fund for achieving common objectives i.e. non-commercial objectives, and that all member firms contributed towards budgeted operating expenses of the assessee and were entitled to proportionate share in surplus lying with assessee in case of dissolution. The sole objective of the assessee was to benefit its members) place of subscription to evolve better professional practices and articles did not reflect any element of commerciality between member and assessee. Since all three tests of mutuality were satisfied, receipts of the assessee from its members would not be in nature of FTS, and same would be exempt from tax having regard to the principle of mutuality.(AY. 2008-09 to 2011-12)CIT (IT) v. Deloitte Touche Tohmatsu (2023) 335 CTR 271/ (2024) 296 Taxman 104 (Delhi)(HC)

6. S. 12AB: Procedure for fresh registration Cancellation of registration with retrospective effect – On writ filed by the petitioner, the Court granted the interim stay. [S. 12A, 12AA, 12AB(4), Art. 226] The assessee-trust was granted registration u/s 12A on 28-05-2021 cancelled by the CIT by the order dtd. 30-06-2023 u/s 12A read with section 12AA read with 12AB(4) with retrospective effect. On Writ Petition, to the Court on the issues concerning the jurisdiction and also on the merits. The Court observed the balance of convenience is in favour of the petitioner and would cause the irreparable harm, resulting into disabling the assessee-trust from accepting any contribution from domestic contributors and would derail its programs in pipeline. The interim stay grated. Centre for Policy Research v. PCIT (Central) (2023) 156 taxmann.com 279 / (2024) 461 ITR 540 (Delhi) (HC) Editorial : SLP of Revenue is dismissed , PCIT v. Centre for Policy Research [2024] 297 Taxman 135 / 462 ITR 1 (SC) 
7. S.14A : Disallowance of expenditure – Exempt income – Depreciation – Rule of consistency followed – Appeal of Revenue is dismissed. [S. 32, R.8D]

   On appeal by revenue, the Delhi High Court considered four issues: whether the disallowance calculated under rule 8D should only take into account investments made by the assessee in order to earn exempt income, or whether the addition made by the Assessing Officer was to be deleted in cases where the Assessing Officer had disallowed a portion of an expense because it was unrelated to the assessee’s business but failed to specify which expenses were not incurred for that purpose. Whether computer software that is essential to the operation of hardware can be depreciated at a rate of sixty percent and Is the money spent developing a website considered a revenue expenditure. The Hon’ble Delhi High Court observed that with respect to question ‘A’, the issue is covered by Cargo Motors (P.) Ltd. v. Dy. CIT [2023] 291 Taxman 208/453 ITR 554 (Delhi) wherein the coordinate bench has ruled that the disallowance calculated under Rule 8D of 1962 Rules should factor in only investments made by an assessee to earn exempt income. With respect to the second issue, the same was covered by the decision of a coordinate bench in same is also covered by Pr. CIT v. Times Internet Ltd. [2023] 156 taxmann.com 577 (Delhi) (HC) With respect to question ‘C’ and ‘D’, the same were covered by decisions of the CIT(A) taken in previous assessment years, and the disallowance was deleted. Hence, it was held that rule of consistency should apply and accordingly. Appeal of Revenue is dismissed. (AY. 2012-13)P CIT v. Times Internet Ltd [2023] 156 taxmann. com 577 / (2024)) 296 Taxman 547 (Delhi)(HC)

8. S.14A : Disallowance of expenditure – Exempt income – Shares held as stock in trade – Dividend income earned – Order of Tribunal deleting the addition is affirmed. [S.260A]

   The assessee, a housing finance company earned exempt income from shares held as stock in trade. The Supreme Court has in Maxopp’s case conclusively held that in cases where shares are held by assessee as stock-in-trade, the dividend earned on the said shares is incidental and would not attract the provisions of section 14A of the Act. (Followed: Maxopp Investment Ltd. v. CIT (2018) 91 taxmann.com 154/ 254 Taxman 325 / 402 ITR 640 / (2018) 15 SCC 523 and South Indian Bank Ltd. v. CIT (2021) 130 taxmann.com 178 / 283 Taxman 178 / 438 ITR 1 (SC) (AY. 2010-11) PCIT v. PNB Housing Finance Ltd. (2023) 146 taxmann.com 445 / (2024) 461 ITR 476 (Delhi) (HC)

9. S. 32AB : Investment deposit account – rental income – under the head ‘Income from house property’ will not qualify for deduction u/s. 32AB

   The income from house property, capital gains and other sources are governed by Sections occurring in other parts, the deduction under Section 32AB of the Act cannot be extended to the other parts unless it is specifically provided for in the Act. The rental income earned by appellant and assessed under the head “Income from house property” will qualify for deduction under Section 32AB of the Act.Indian Express Newspapers (Bombay) Ltd. v. CIT [ITXA No. 90 Of 2023, A.Y. 1987-88, (Bom-HC)]

10. S. 36(1)(iii) : Interest on borrowed capital – Business of retail lending as well as Long Term finance for construction of homes – Deduction claimed on interest on Long Term housing loan, which has been recalculated by the AO based on total receipt of the business – Rule of consistency is followed – Order of Tribunal deleting the addition is affirmed.[S.260A]

    The assessee is a subsidiary of PNB. The deduction has been claimed u/s 36(1)(viii) taking into account percentage of total interest received on Long Term housing loan has been upheld by the ITAT stating that the said methodology has been adopted by the assessee consistently and the same was accepted by the Revenue without any objection. The Revenue had not filed appeal challenging the deduction allowed in the preceding years. Following the judgment of the Supreme Court in Pr. CIT v. Maruti Suzuki India Ltd. (2019) 107 taxmann.com 375 / 265 Taxman 215 / 416 ITR 613, Revenue’s appeal dismissed. (AY. 2010-11)PCIT v. PNB Housing Finance Ltd. (2023) 146 taxmann.com 445 / (2024) 461 ITR 476 (Delhi)(HC)

11. S. 40A (2): Expenses or payments not deductible – Excessive or unreasonable – Burden of proof on Revenue to show that expenditure was Excessive – The Assessing Officer is duty-bound to provide an opportunity to the assessee to place on record the requisite evidence to justify its claim Matter remanded to the file of the Assessing Officer – Directed to issue fresh notice and decide in accordance with law. [S. 40A(2)(a)), 40A(2)(b), 260A]

    On appeal the Court held that the Assessing Officer is duty-bound to provide an opportunity to the assessee to place on record the requisite evidence to justify its claim. The matter was remanded since AO did not seek the relevant evidence and simply rejected the claim made by the assessee.(AY. 2011-12, 2012-13)Mehra Jewel Palace (P.) Ltd. v. PCIT (2024) 460 ITR 209/ 296 Taxman 489(Delhi)(HC)

12. S. 36(1)(iii): Interest on borrowed capital – Interest free advance to subsidiary – for the purpose of business – allowable

    Assessee is engaged in the business of operating amusement park, infrastructure development management and finance activities. Assessee had given a sum of Rs. 25 crores to one PAN India Infrastructure Private Limited, its subsidiary. The Assessing Officer took the view that Assessee had diverted the interest bearing fund by giving interest-free advance and, therefore, the entire interest claim of Rs. 1,48,10,695/- needs to be disallowed. There were also certain other disallowance made by AO.The finance provided to the wholly owned subsidiary was for its business of infrastructure and is used for that purpose. It has accepted that the nexus between the advance of funds and the business of Appellant/Assessee carried out through the subsidiary stood established and hence, no disallowance under Section 36(1)(iii) of the Act was warranted.PCIT-7 v. ESSEL Infra Projects Ltd. (Former PAN India Paryatan Ltd.)ITXA No. 927 Of 2018, Dated: 31/01/2024. (Bom.)(HC)

13. S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits – Genuineness of transaction was in doubt – Order of Tribunal is affirmed. [R.6DD(j)]

    Appeal of the assessee dismissed by the Delhi High Court and disallowance u/s. 40A(3) of the Act upheld as the assessee had made purchases in cash and could not substantiate the genuineness of the transaction. Assessee made payment of purchases through bearer cheques to 3 suppliers and filed confirmations from suppliers which were undated and were bearing identical language. As a matter of fact, Tribunal noted that this brought genuineness of the transaction into serious doubt. High Court observed that even though the assessee was a new entrant in the business, as it was mentioned in the confirmations obtained from the suppliers, assessee could have made payment to allay concerns through bank drafts or through other banking channel. Assessee relied on CBDT Circular No. 220 dated 31.05.1977 and submitted that case of the assessee falls under Rule 6DD(j). High Court held that from AY 2009-10, Rule 6DD has been substituted vide Notification No. 97/2008 dated 10.10.2008. Even claim was not allowable as per CBDT Circular 220 dated 31.05.1977, as the assessee could not substantiate the genuineness of the transaction, which is required as per said CBDT Circular. High Court upheld the view of the Tribunal.(AY. 2013-14)Rajesh Kumar v. CIT (2024) 296 Taxman 540 (Delhi)(HC)Editorial : SLP filed by assessee before Supreme Court is dismissed vide Order dated 18.03.2024 in SLP(Civil) Diary No. 272 of 2024

14. S. 45: Capital gains – Business income – Total income – Redemption of mutual fund units – Income taxable as capital gains and not as business income. [2(45), 28(i), 260A]

    Assessee-partnership firm is engaged in the business of investing in mutual funds. During the year, it earned profit on redemption of mutual funds which were offered to tax under the head ‘Capital Gains’. However, the assessing officer assessed the income under the head ‘Profits and Gains from Business or profession’. The Commissioner of Income-Tax (Appeals) and Hon’ble Delhi Tribunal upheld taxability under the head ‘Capital Gains’. On appeal by the Department, the Hon’ble Delhi High Court upheld the order of the lower Appellate Authorities holding that owing to the quantum of trade, value, purpose, period for which mutual funds were held, and how disclosure had been made in books of account, the transaction was in the nature of investment and not motivated by trade. Therefore, the gains were to be assessed under the head ‘Capital Gains’. Circular No. 19/2017, dated 12-6-2017 (AY. 2006-07, 2010-11)PCIT v. Wig Investment (2024) 461 ITR 117 / 158 taxmann.com 379 (Delhi HC)

15. S. 47(iv) : Capital gains – Transaction not regarded as transfer – Capital gains – Subsidiary – Prerequisites provided to Indian subsidiary company – Assessee inadvertently offered receipt for levy of tax – Tax could not be levied as receipt did not constitute income – Income-tax leviable only in accordance with provisions of Income-tax – Act Admission by assessee is not conclusive. [S.4, 45]

    Assessee transferred assets to its 100 percent subsidiary and surplus generated from the same was offered to tax in the return of income with a note providing details of transactions offered to tax. On appeal to the CIT(A), it was held that surplus generated by the assessee on transfer would be chargeable to tax as the asset was employed in the business. However, the Tribunal held that surplus generated on account of transfer of asset could not be treated as income in view of the provisions of section 47(iv) of the Act. The Hon’ble High Court dismissed the revenue appeal and held that the surplus generated on transfer could not be treated as income under section 47(iv). Further, merely because the assessee inadvertently offers a receipt for levy of tax, tax cannot be levied by the revenue if it is not otherwise constituting income of the assessee. (AY. 2012-13)PCIT v. Ansal Properties and Infrastructure Ltd (2023) 152 taxmann.com 49 / (2024) 460 ITR 341 (Delhi) (HC)

16. S.56: Income from other sources – Consideration received for shares in excess of fair market value – Allotment of new shares as right is creation of property cannot be considered as transfer – Section 56(2)(vii)(c) not applicable on new allotment of shares- Issue of additional shares for renunciation of rights issue Wife/Father fall within definition of ‘relatives’ excluded – Order of Tribunal is affirmed. [S. 56(2)(vii)(c), 260A]

    The case of assessee was re-opened and notice was issued under section 148 as alleged that the aggregate FMV of shares allotted to the assessee far exceeded consideration amount paid for receipt of shares. The Assessing Officer held that the differential amount had escaped assessment which should have been taxed under provisions of section 56(2). Further, the assessing officer also taxed differential amount on shares allotted on account of renouncement of rights by wife & father of the assessee.On the assessee appeal, the Commissioner (Appeals) and the Tribunal provided partial relief. Aggrieved by the order, the department filed appeal before the High Court.On the first issue the Hon’ble High Court held that the provisions of section 56(2) would not be applicable to the issue of new shares considering that (i) Explanatory note to the Finance Bill, 2010, clarifies that section 56(2)(vii)(c) ought to be applied only in the case of transfer of shares. (ii) Allotment of new shares cannot be regarded as transfer of shares (iii) There must be an existence of property before receiving to apply the provisions of section 56(2)(vii)(c) (iv) Issue of new shares by company as a right shares is creation of property and merely receiving such shares cannot be considered as a transfer.On the second issue the Hon’ble High Court held that issue of shares in the name of wife and father of the assessee would not hit by section 56(2)(vii)(c) as both would be covered by definition of “relative” and the exempt from ambit of the said provision. (AY. 2013-14)PCIT v. Jigar Jashwantlal Shah (2023) 154 taxmann. com 568 /335 CTR 414 (2024) 460 ITR 628 (Guj) (HC) Editorial : Jigar Jashwantlal Shah v. ACIT [2022] 142 taxmann.com 200 (Ahd)(Trib.) affirmed.

17. S. 68: Cash credits – Share transactions – Tribunal misdirected itself and made an addition on presumptive income – Matter remanded back for de novo examination. [S. 254(1)]

    Held that the Tribunal misdirected itself on facts and in law, in directing the addition on the ground that it represented an unexplained cash deposit, without having regard to the loss suffered by the assessee while trading in equities and commodities. Hence, the matter was remanded to the Tribunal for a de novo examination. (AY. 2011-12)Dinesh Dahiya v. PCIT (2024) 296 Taxman 317 / 461 ITR 374 (Delhi)(HC)

18. S.68: Cash credits – Sale of shares – Bogus loss – Penny stocks – Payments made through banking channel – No evidence of agreement to convert unaccounted money by taking fictitious loss – Order of Tribunal deleting the addition is affirmed- No substantial question of law. [S. 260A]

    The Hon’ble High Court dismissed the appeal filed by the revenue and concurred with the findings of the Hon’ble Tribunal, thereby, holding that the shares were purchased online in demat account, payments were made through banking channel and consideration was also received through bank channels. Further, it was also noted that the Assessing Officer does not have any independent source or evidence to show that there was an agreement between the assessee and any other party. Thus, in absence of any specific finding, the assessee cannot be held to be linked to the wrong acts merely based on surmises and assumptions. (AY. 2012-13)

    PCIT v. Champalal Gopiram Agarwal (2023) 155 taxmann.com 66 / (2024) 460 ITR 277 (Guj)(HC)

19. S. 68 : Cash credits – Creditworthiness established – Some of the lenders replied in notice issued by the Assessing Officer – Order of Tribunal deleting the addition is affirmed.[S.133(6), 260A]

    The AO had made an addition u/s. 68 of the Act and disallowed interest by relying on answers given to certain questions and ignoring details submitted by the assessee. The CIT(A) deleted the addition by relying on the decision in the case of CIT v. Dataware (P.) Ltd. [ITAT No. 263 of 2011, dated 21-9-2011] and allowed the appeal filed by the assessee. The Tribunal upheld the deletion by giving elaborate reasons as to how the creditworthiness of the lenders had been established. Therefore, the High Court dismissed the appeal filed by the Revenue challenging the order passed by the Tribunal on the ground that the AO had brought on record about the non- existence of the lenders. (AY. 2015-16)PCIT v. Overtop Marketing (P.) Ltd. (2023) 461 ITR 67 /148 taxmann.com 94 (Cal) (HC)

20. S. 68: Cash credits – Share premium – Identity and credit worthiness established – Purchases from unregistered dealers – Gross profit declared – Order of Tribunal is affirmed. [S. 260A]

    Held that the Tribunal has rightly held that the provisions of sec.68 of the Act cannot be invoked, more particularly when the addition is made on account of the share premium and the share application money by the investors whose identity, creditworthiness and genuineness is proved by the assessee before the authority. In respect of the purchases, the Bench held that the assessee has already declared gross profit as a whole including the purchases from registered parties @ 5.76%, and therefore, if any addition is to be made, it should be the difference between the profit determined by the Assessing Officer on the URD purchases vis-a- vis the gross profit already declared by the assessee. Hence, the appeal dismissed. (AY. 2011-12)PCIT v. Siyaram Metals Udyog (P.) Ltd. (2023) 156 taxmann.com 432/(2024) 296 Taxman 94 (Guj)(HC)

21. S. 68 : Cash credits – Sale consideration – Assessee was co-purchaser of a land – Assessing Officer received information in form of a photocopy of an alleged agreement to sell – other evidence to support veracity of recitals made in aforesaid alleged agreement

    AO issued reopening notice and made addition to income of assessee on account of purchase of land from undisclosed sources, since entire foundation of reopening of assessment and addition to income was laid on basis of photocopy of an alleged agreement to sell property, which was not supported by any other evidence, impugned addition was unjustified and was to be deletedPCIT v. Smt. Rashmi Rajiv Mehta [ITXA No. 984 & 989 OF 2019, (Delhi)]

22. S. 69 : Unexplained investments – Share capital – Addition made based on unproven and untested statements recorded during searches – Onus to prove investments bogus not discharged – Deletion of addition proper. [S. 132, 260A]

    In the facts of the present case, Hon’ble Court has held that the department could not produce any evidence to conclude that any part of the investment was false or bogus. The burden to prove otherwise rested on the department. Unless the initial onus has been discharged by leading some evidence that led to the conclusion that the investment was never made, the burden that was cast on the department remained undischarged. (AY.2010-11)PCIT v. PNC Infratech Ltd. (2024) 461 ITR 92 (All) (HC)

23. S. 92C : Transfer pricing – Arm’s length price – Avoidance of tax – International transaction – Specified domestic transaction – Transfer pricing adjustment on basis of transactions where prices charged to Associated Enterprises was less than that charged to unrelated parties – Contrary to legal provisions – Deletion of upward transfer pricing adjustment by the Tribunal is affirmed. [S.92, 260A]

    Hon’ble court has held that in terms of the provision of section 92C of the Act, ALP cannot be determined by comparing prices charged to Group Companies, i.e., controlled transaction. Hence, TPO ought to have arrived at ALP of assessee’s sale to its AE by only comparing it with an uncontrolled transaction of sale and, therefore, approach of TPO was contrary to provisions of law. (AY. 2004-05)PCIT v. Audco India Ltd (2019 ) 264 Taxman 237 / (2024) 461 ITR 152 (Bom)(HC) Editorial : SLP of Revenue is dismissed, PCIT v. L & T Valves Ltd. [2023] 295 Taxman 585 (2024) 461 ITR 157 (SC)

24. S. 92C : Transfer pricing – Arm’s length price – Avoidance of tax – International transaction – Specified domestic transaction – ITAT directed the TPO to consider the functions, assets and risks (‘FAR’) of the year under consideration with FAR of the years in Advance Pricing Agreement (‘APA’) – Order of Tribunal is affirmed. [S.92CA, 260A]

    The assessee had entered into APA with CBDT on 6.8.2019 covering transactions related to AYs. 2013-14 to 2021-22. For A.Y. 2012-13, eighteen transactions were covered under APA. Out of the eighteen (18) transactions, it was agreed that sixteen (16) transactions will be benchmarked by using the other method while the remaining two (2) transactions will be benchmarked by using Transaction Net Margin Method (TNMM) and Resale Price Method. In the set aside proceedings under the order of the High Court, the Tribunal directed the TPO to consider the FAR of the year under consideration with FAR of the years in APA. The Revenue sought to challenge this direction on the ground that so far as A.Y. 2012-13 was concerned, APA could not have been used as the basis for benchmarking. The assessee defended the order of the Tribunal on the ground that the Tribunal had, keeping in mind the principles captured in the APA, passed order with the caveat put in place that the TPO needs to verify as to whether the Functions, Assets and Risks (FAR) is the same. The High Court upheld the order passed by the Tribunal as it was passed after taking into consideration several judgments on the issue and held that no error has been committed by the Tribunal concerning either in the application of law or on facts. (AY.2012-13)PCIT v. Springer India (P.) Ltd (2023) 151 taxmann.com 251 / (2024) 461 ITR 61 / (Delhi)(HC)

25. S. 115BAA: Tax on income of certain domestic companies – Determination of tax in certain cases – Failure to file Form No 10IC before due date of filing of return – Due to technical error, there being no fault of assessee, it could not be deprived of benefit under section 115BAA particularly when this being first year for availing such benefits – Order of Tribunal is affirmed.[S. 260A]

    Assessee, a domestic textile company, opted to be taxed under section 115BAA and declared their return of income as nil. The AO assessed the return of income under section 115JB for the reason that it had not filed Form No. 10IC, on or before the due date of filing of return of income. The Commissioner (Appeals) confirmed the assessment order. On appeal, the ITAT allowed the assessee’s appeal. The Hon’ble Gujarat High Court observed that Form 10IC was furnished by the assessee on 29-1-2022 and therefore, we are of the opinion that since the assessee could not upload Form No. 10-IC, on ITBA portal on account of technical error, there being no fault of the assessee, it could not be deprived of benefit particularly when this being the first year for availing such benefits. The High Court dismissed the revenue’s appeal as there was no error of fact and Law in the order of the ITAT. (AY. 2020-21)PCIT v. KGY Glass Industries (P.) Ltd. (2023) 156 taxmann.com 18 /(2024) 296 Taxman 180 (Guj)(HC

26. S. 119 : Central Board of Direct Taxes – Instructions to subordinate authorities – Application for condonation of delay – Capital gains – Agricultural land – With in specified urban limits – PCIT had gone into the merits of the claim and the merits of the delay condonation application had not been taken – Matter remanded back. [S.10(37), 119(2)(b), Art.226]

    The assessee filed a ‘Nil’ return on behalf of her husband with an application for condonation of delay in terms of s. 119(2)(b). The Pr. CIT rejected the application because the assessee had not established that the land in question was agricultural land and further, had not produced relevant evidence of fulfilment of conditions specified in section 10(37)(ii).Held that though the Circular authorizes Pr. CIT to consider even merits of refund claim while exercising delegated power u/s. 119(2) (b), this was illegal for the mandate of the Act cannot be avoided through any administrative circular issued by the Board. Since Pr. CIT had gone into merits of the claim for refund when the application u/s.119 (2) was filed for condonation of delay in preferring said refund claim and a decision on merits on delay condonation application had not been taken by Pr. CIT, matter remitted for fresh consideration. (AY. 2012-13)Daisy v. PCIT (2024) 296 Taxman 80 (Ker)(HC)

27. S. 119: Central Board of Direct Taxes- Instructions – Quasi-judicial authorities – Order should be a speaking order granting a reasonable opportunity of being heard. [S.119(2) (b), Art. 226]

    An application seeking condonation of delay in filing return of income for AY 2012-13 and AY 2013-14 was filed by the assessee which was rejected by CBDT without providing the assessee an opportunity of being heard and without providing the material relied upon. Aggrieved, the assessee preferred a writ before the Hon’ble Madras High Court held that the power under section 119(2)(b) being quasi- judicial in nature and which could result in adverse civil consequence, must be exercised in compliance with principles of natural justice. Since the impugned order does not assign reason but only contains the conclusion, the order was set aside with a direction to consider the application after granting a reasonable opportunity of hearing within a period of 8 weeks from receipt of the Hon’ble High Court order and pass a speaking order. (AY. 2012-13, 2013-14)Envission Communication (P.) Ltd. v. PCIT (2024) 460 ITR 620 / 296 Taxman 520 (Mad) (HC)

28. S. 119 : Central Board of Direct Taxes – Instructions – Extension of time for filing of return – Seeking condonation of delay in filing return of income – Principal CCIT should have taken lenient view in considering difficulties faced by assessee – due to Covid-19.[S.119(2)(a), 139, Art.226]

    By way of writ, the assessee challenged the validity of order passed by PCCIT on request for condonation of delay and permission to file return of income for the relevant assessment year 2020-21. The assessee contested that the delay in filing of return was because of Covid -19 pandemic situation that the Accountants and Auditors of the company were not available, and the Company Secretary was not keeping well, filed an application for condonation of delay in filing return. Dismissing, the order, the Hon’ble Patna High Court stated that the PCCIT should have been more lenient and should have considered the reasons file for condonation of delay under section 119(2)(a) and should have taken a lenient view considering the difficulties, which the persons were facing during the period of Covid-19 pandemic and general lock-down during the period. Therefore, he remanded the matter back to PCCIT to consider the condonation of delay and pass an order with four weeks thereafter. (AY.2020-21)Patna Metro Rail Corporation Ltd. v. PCIT (2023) 150 taxmann.com 434 / 333 CTR 557 (2024) 460 ITR 731 (Patna)(HC)

29. S. 132 : Search and seizure – No incriminating material found during the course of search action – Completed assessment cannot be reopened.[S. 153A, 260A]

    Allowing the appeal the Hon’ble court has held that the revenue did not secure any incriminating material qua the assessee during the course of search. No incriminating material even according to the revenue was found during the search action. A completed assessment could be reopened only if incriminating material was found during the course of search action. Hence, the addition made by the AO is unjustified and deleted. (AY.2006-07)Shyam Sunder Jindal v. Asst. CIT (2024) 461 ITR 96 (Delhi)(HC)

30. S.142 (2A): Inquiry before assessment – Special audit – Limitation – Power to extend time limit for submitting audit report lies with the assessing officer and not the Commissioner – Appeal of the Revenue is dismissed. [S. 132, 142(2C), 153A, 153B, 260A]

    The assessee, engaged in the business of construction and allied services, was subjected to a search under section 132 and pursuant there to a special audit of the assessee’s books of accounts was ordered. The Special auditor made a request for extension of time to the assessing officer who forwarded the request to the Commissioner, who in turn granted an extension of 60 days for furnishing the audit report. The Hon’ble Delhi Tribunal held that such extension of time granted in the matter did not align with the provisions of section 142(2C) and therefore the assessment order passed by the assessing officer is barred by limitation. On appeal by the Department, the Hon’ble Delhi HC held that since the initial timeframe for the conduct of the audit is mandatorily required to be fixed by the assessing officer as per section 142(2C), the power to vary the original time frame by way of extension under the proviso appended to it has been consciously conferred by the legislature only on the Assessing Officer and such power being non-delegable, the same could not have been discharged by the Commissioner. (AY.2007-08, 2008-09)

    PCIT (Central) v. Soul Space Projects Ltd (2023) 157 taxmann.com 272/(2024) 460 ITR 642 (Delhi) (HC)

31. S. 143(2): Assessment – Notice – Defective return – Date of filing of original return under section 139(1) was to be considered for purpose of computing period of limitation under sections 143(2) and 142(1), and not date on which defects actually came to be removed under section 139(9) – Notice is quashed. [S. 143(2), 139(1), 139(9)]

    Assessee filed return on 14.10.2016. Notice u/s. 139(9) of the Act issued upon the assessee on 06.02.2017. Assessee cured defects on 18.02.2017. Subsequently, again, 2nd Defective Notice u/s. 139(9) of the Act issued upon the assessee on 10.07.2017. Assessee cured defects on 20.07.2017. Notice u/s. 143(2) of the Act was issued on 11.08.2018 and Notice u/s. 142(1) of the Act was issued on 31.08.2018. As per Section 143(2) as amended by Finance Act, 2016, Notice u/s. 143(2) of the Act could have been issued within 6 months from the end of the financial year in which the return of income is filed. High Court held that time limit should be reckoned from the date of filing return u/s. 139(1) and not the date of curing defects u/s. 139(9). Thus, in the instant case, due date was 30.09.2017 being within 6 months from the end of the FY in which return is filed (i.e. from 31.03.2017 being end of FY – from 139(1) date 14.10.2016). Thus, Notice u/s. 143(2) of the Act dated 11.08.2018 was held to be time barred and consequently, Notice u/s. 142(1) of the Act dated 31.08.2018 shall also collapse. (AY. 2016-17)SMC Comtrade Ltd. v. ACIT (2024) 296 Taxman 214 (Delhi) (HC)

32. S.143(3): Assessment – Limited scrutiny – Issue decided by AO with respect to carry forward of losses was not part of limited scrutiny for which assessment was directed to be scrutinised, since AO did not abide by Instruction No. 5/2016, dated 14-07-2016 and exceeded his jurisdiction, disallowance made with respect to carry forward of losses was to be deleted.[S. 72, 260A]

    Assessee’s case selected for scrutiny assessment. AO issued notice u/s 142(1) and passed order u/s 143(3) whereby he rejected et-off and carry forward of loss and made additions in income of assessee. On appeal to the Tribunal, it was held that the limited scrutiny for which the assessment was ordered to be scrutinized did not include the matter that the Assessing Officer decided. On appeal, the Calcutta High Court observed that the CBDT has noted instances where some of the Assessing Officer were travelling beyond the issues while making assessment in limited scrutiny cases by initiating inquiries on new issue without complying with mandatory requirements of the relevant CBDT Instruction dated 26-9- 2014, 29-12-2015 and 14-7-2016. Further, it was reiterated that the Assessing Officer should abide by the Instructions of CBDT while completing limited scrutiny assessment and should be scrupulous about maintenance of note sheets in assessment folders. The order of the tribunal upheld. (AY. 2015-16)PCIT v. Weilburger Coatings (India) (P.) Ltd (2023) 155 taxmann.com 580 /(2024) 296 Taxman 205 (Cal) (HC)

33. S. 143(3): Assessment – Assessment order passed in spite of valid objections pending before DRP is bad in law.[S.144C, Art. 226]

    Allowing the petition the Court held that it has been held that the assessment order passed by AO during the pendency of valid objections before the DRP, is against the provisions of law. Hence, the same is quashed and set aside.Convergys India Services v. NFAC (2024) 461 ITR 88 (Delhi)(HC)

34. S. 143(3): Assessment – Principles of natural justice – Cross examination not granted by the Assessing Officer – Order of the Tribunal setting aside the assessment was upheld by the High Court. [S. 260A]

    The AO completed the assessments for A.Y. 2013-14 to 2017-18 based on the information received from Directorate General of GST Intelligence (DGGI) intimating that the assessee had suppressed the sales by not accounting the same or by undervaluation. The AO referred and relied upon the statements recorded of various persons. The request to grant cross examination by the assessee was not granted by the AO while completing the assessment and making additions on account of income from such sales. The CIT(A) granted partial relief. However, on further appeal, the Tribunal set aside the assessment on the ground that orders were passed in violation of principles of natural justice as no cross examination was granted. The appeal filed against the Tribunal orders were dismissed by the High Court holding that the Tribunal had rightly interfered with orders passed by lower authorities. (AY.2013-14 to 2017-18)PCIT v. DSG Papers P. Ltd. (2024) 461 ITR 4 (P&H)(HC)Editorial: Relied on Andaman Timber Industries v CCE [2015 81 CTR (SC) 241/ 38 GSTR 117 (SC), CIT v Rajesh Kumar [2008 306 ITR 27 (Delhi) (HC)

35. S.144B: Faceless assessment – Assessment order passed without issuing draft assessment order, matter remitted to pass a fresh order per law. [S. 148, Art. 226]

    No draft assessment order has been passed by the AO as contemplated u/s.144B. There is a material violation of the procedure prescribed u/s.144B. Consequently, the case is remitted back to the AO to pass a fresh order on merits following the law within six months. (AY. 2017-18)Devendran Coal International (P.) Ltd. v. NFAC (2024) 296 Taxman 417 (Mad)(HC)

36. S. 144B: Faceless Assessment – Principles of natural justice – At least 21 days time should be given to file reply – Legislative Intent is to provide an opportunity of being heard to the assessee before passing any orders, which are prejudicial to their rights/ interests – It is bounden duty of the Assessing Officer to pass a detailed order, providing reasons for rejection of the contention of the assessee – Matter restored to the file of the AO as the assessee was granted time of 5 days only without referring to opportunity of personal hearing.[Art. 226]

    Through income-tax portal, the AO issued show cause to the assessee to file its objections within 5 days without referring to granting of personal hearing. As the assessee failed to file its response, the AO passed assessment order which was challenged in writ. Taking note of Legislative Intent that section 144B of the Act was to provide an opportunity of being heard to the assessee before passing any orders, which are prejudicial to their rights/interests. The High Court held that 5 days period granted to file response without providing for personal hearing was insufficient and period of at least 21 days should have been given for filing reply. The Court also held that it is bounden duty of the Assessing Officer to pass a detailed order, providing reasons for rejection of the contention of the assessee. The assessment order passed was set aside and matter was remanded to the AO for fresh consideration.(AY.2017-18)(SJ)Gemini Film Circuit v. NFAC, Delhi. (2023) 157 taxmann.com 445 (2024) 461 ITR 13 (Mad)(HC)

37. S. 144B : Faceless Assessment – Video Conferencing not granted by the Assessing Officer – Grave abrogation of jus naturale – impugned assessment order is set aside.[S. 144B(6)(viii), 147, 148, Art. 226]

    Reassessment proceedings for the AY 2018-19 were completed by the NaFAC vide Assessment Order u/s. 147 of the Act dated 15.03.2023 without considering the petitioners request for personal hearing through video conferencing as requested by the petitioner before the AO. Not granting opportunity of personal hearing is in violation of Section 144B(6)(viii) of the Act and is in grave abrogation of jus naturale. Impugned Reassessment Order and Notice of Demand, both dated 15.03.2023, were set aside. Matter remanded back to AO to consider the judicial precedents cited by the petitioner in its reply and to grant her a fair opportunity of being heard in person or through Authorized Representative. (AY. 2018-19)Shashi Bala Sharma v. ITO (2024) 296 Taxman 446 (Delhi)(HC)

38. S. 144B: Faceless assessment – Reassessment – Principle of natural justice – Technical glitch – Order is set aside.[S. 147, 148, Art.226]

    The assessee was given an opportunity for a personal hearing through videoconferencing, which could not be concluded due to a technical glitch. When the officer from NFAC accepted such a glitch, the assessment order finalised was in breach of principles of natural justice and hence was to be quashed and set aside. The matter was remanded to the competent authority. (AY. 2016-17)Kumarbhai Manharlal Desai v. ACIT (2024) 296 Taxman 12(Guj)(HC)

39. S. 144C(2) : Draft Assessment Order – Due to oversight/inadvertence Petitioner did not inform the AO within 30 days period prescribed under Sub-section (2) of Section 144C of the Act that it had filed objection – AO passed assessment order unaware of the objection filed before DRP

    Petitioner had already filed a reference raising its objections to the DRP within the 30 days period and Section 144C(4) of the Act requires the AO to pass a final order including the view expressed by the DRP, the order of the AO is set a side. The AO shall take further steps in the matter after the DRP passes its order on the objection filed by Petitioner, in accordance with law.Omni Active Health Technologies Limited v. Assessment Unit, Income Tax Department NFAC. [WP No. 474 Of 2024, Dated: 04/03/2024. (Bom.) (HC)]

40. S.147: Reassessment – After the expiry of four years – No failure to disclose material facts – Reassessment notice and order disposing the objection is quashed.[S. 2(22)(e), 147, 148, Art. 226]

    Allowing the petition the Court held that when the assessee had made full and true disclosures of all the details as required by the AO during the original assessment proceedings, such as details of loans taken and shareholding by the assessee in the companies from which the loan was taken–It was the duty of the AO to draw the relevant inferences based on the disclosures– the assessment could not be reopened beyond the period of four years because AO had the reasons to believe that undisclosed income under S 2(22)(e) has escaped assessment because the assessee had not disclosed the percentage of shareholding–Held, once all the primary facts are before the assessing authority, it requires no further assistance by way of disclosure. Reassessment notice and order disposing the objection is quashed.(AY. 2006-07)Noshir Darabshaw Talati v. Dy. CIT (2024) 296 Taxman 133 / 462 ITR 37 (Bom)(HC)

41. S.147: Reassessment – After the expiry of four years – Change of opinion – Direction of Audit party – Amalgamation – AO issued notice on the ground of directions issued by the audit party – Being not on AO’s personal satisfaction, reopening of assessment without any basis, merely on change of opinion and not permissible in law – Reassessment notice and order disposing the objection is quashed.[S. 72A(4), 148, Art. 226]The assessee company filed the return of income, subsequently revised, which was selected for scrutiny under CASS and the assessment was completed u/s 143(3). Later on, the notice u/s 148 issued after the period of four years from the end of the relevant assessment year – the objections raised by the AO – demonstrates the opinion of the AO that the petitioner’s claim for set off of business loss and unabsorbed depreciation had correctly been allowed as per the provisions of the law. However, in less than 45 days, the same AO, relying on the same audit objection, invoked the jurisdiction u/s 148 of the Act. Allowing the petition, the Court held that the notice issued by the AO on the ground of directions issued by the audit party and not in his personal satisfaction is not permissible in law. Larsen & Toubro Ltd. v. State of Jharkhand (2017) 79 taxmann.com 267 (SC)/ (2017) 13 SCC 780; CIT (LTU) vs. Reliance Industries Ltd. (2017) 80 taxmann.com 242 / (2016) 382 ITR 574 (Bom.) and IL and FS Investment Managers Ltd. vs. ITO (2008) 298 ITR 32 (Bom.) followed. (AY. 2015-16) Bennett Coleman & Co. Ltd. v. DCIT (2022 ) 145 taxmann.com 228 (2024) 460 ITR 345 (Bom)(HC)
42. S.147 : Reassessment – After the expiry of four years – No failure to disclose material facts – Capital Gains Full value of consideration – Stamp Duty Valuation – Reassessment notice and order disposing the objection is quashed.[S.45, 50C, 148, Art. 226]

    Allowing the petition the Court held that the market value determined by the collector for the payment of stamp duty was more than the sale consideration. The Assessee challenged the market value determined. The Government of Andhra Pradesh, by notification, reduced the valuation. AO finalised the Order based on the value as per the said notification. Since AO had all the information required to finalise the order. The Assessing Officer issued notice under section 148 of the Act. On writ the Court held that there was never a failure from assessee to truly and fully disclose material facts. Hence, assessment could not be reopened under S.147. Accordingly the reassessment notice and order disposing the objection is quashed. (AY. 2006 -07)Pfizer Ltd v. UOI (2024) 296 Taxman 2(Bom)(HC)

43. S.147: Reassessment – After the expiry of four years – Money transferred to assessee’s bank account from cash deposits in other persons bank account – Borrowed Satisfaction – Mere increase in funds from previous year – No Tangible material on record – Notice and order disposing the objection is quashed.[S. 148, Art. 226]

    Allowing the Writ of the assessee, Delhi High Court noted that reopening was initiated on the basis of ‘reasons to believe’ which contained information about letter from ITO(Nahan) and an FIR and Chargesheet including names of Director of the belief that income, otherwise chargeable to tax, had escaped assessment. As per Reasons to believe, AO initiated reopening by stating that there is increase in funds from previous year and had no tangible material and no evidence against the assessee. Merely a case of suspicion. Sine qua non for triggering the assessment proceedings is not a ‘reason to suspect’ but a ‘reason to believe’ that income chargeable to tax has escaped assessment. AO was also unaware about the nature of deposits which is evident from the following observations made by him: “…may be in the guise of Share Capital, including Share Premium, bogus sales to Ms Para Impex Chem, or Long term loans or all…”. Mere increase in source of funds, without any corroborative evidence, cannot be basis of the belief that income, otherwise chargeable to tax, had escaped assessment. Notice u/s. 148 quashed. As regards argument of petitioner that AO did not supply copy of FIR and Charge sheet filed by CBI, to the petitioner, High Court noted that we do not lay much store on this assertion, as names of Director were mentioned in FIR and this information would have already been available with the petitioner in the ordinary course. (AY.2011-12)Saraswati Petrochem Pvt. Ltd. v. ITO (2024) 296 Taxman 260 (Delhi)(HC)

44. S. 147 : Reassessmet – After the expiry of four years – Change of opinion cannot be a reason to reopen the assessment.[S. 35D, 148, Art. 226] 

    Held when all the facts were correctly disclosed and were on record during the assessment proceedings under section 143(3) for the relevant assessment year, and the assessing office did not consciously tax the income which was now sought to be looked into by reopening the assessment under section 147, it was the clear case of change of opinion, and hence reassessment order was to be quashed and set aside. (AY. 2014-15)Palco Recycle Industries Ltd. v. Dy. CIT (2024) 296 Taxman 44 (Guj.)(HC)

45. S.147: Reassessment – After the expiry of four years – Reopening of assessment on the basis of decision of court that approval not obtained from competent authority – not a case of income escaping assessment due to failure on the part of the assessee to disclose material facts during the course of assessment – reopening unjustified.[S.10B, 148, Art. 226]The assessee in its return filed for the relevant assessment year claimed deduction under section 10B of the Act. The AO while finalising the assessment accepted the claim of the assessee. Subsequently after the expiry of 4 years the AO issued notice under section 148 of the Act relying on the decisions of Delhi High Court where in the court had held that the approval for the purpose of section 10 B can only be an approval granted by the board constituted by the Central Government under the provisions of Industrial (Development and Regulation) Act 1951 and therefore, the assessee is not entitled to claim the exemption under section 10B of the Act. Hon’ble Court had quashed the notice issued under section 148 of the Act as the same was issued beyond the period of 4 years from the end of relevant assessment year and there is no failure on the part of the assessee to furnish all the relevant material facts. The court has further observed that the responsibility of the assessee is only to place the materials before the AO and the assessee would not be responsible for the inferences made by the assessing authority based on the materials that he has placed before the concerned authority. A change in the opinion or later decision on the legal aspects cannot be a reason for reopening an assessment which has been included on the basis of the material which is made available in cases where the reopening is attempted after 4 years unless the assessee failed to disclose the relevant information. (AY.2006-07 to 2008-09)Digital Mesh Softech India Pvt. Ltd. v. UOI (2024) 461 ITR 223 (Ker)(HC)
46. S.147: Reassessment – After the expiry of four years – Compensation- Business expenditure – No new tangible material – Assessee had filed reply during original assessment proceedings – twin conditions – New tangible material and failure on the part of the assessee to disclose all material facts truly and fully, does not exist – Notice and order disposing the objection is quashed. [S. 37(1), 148, Art. 226]

    Allowing the petition the Court held that Notice u/s. 148 of the Act was without jurisdiction as there was no new tangible material was available with the AO and reassessment was initiated on the basis of material which was already available on the record. Reassessment initiated beyond 4 years. Specific query was raised by the AO during the course of original assessment and AO had asked assessee to justify the lump sum compensation of Rs. 135 Lakhs debited by the assessee in the Profit and Loss Account. Assessee submitted Audit Report and filed letter dated 03.11.2014 and furnished copy of the order of the court and related documents to justify the Lump Sum Compensation paid. Assessee further filed letter dated 22.12.2014 and furnished MoU entered into between the petitioner and Ratna Developers, ledger account of Lump Sum Compensation account of Ratna Developers and Bank Statements earmarking the payment made to Ratna Developers. AO was satisfied and did not make any additions and assessment u/s. 143(3) of the Act was completed. Notice u/s. 148 of the Act dated 30.03.2019 issued on the petitioner was quashed as reopening was not based on any new tangible material. Further, the twin condition i.e. existence of new tangible material and failure on the part of the assessee to disclose all material facts (truly and fully), does not exist. Thus, the Court held that jurisdiction under section 148 cannot be exercised. (AY 2012-13)Ratnabhumi Developers Ltd. v. ACIT (2024) 296 Taxman 364 (Guj)(HC)

47. S. 147 : Reassessment – With in four years – Advancing loan to sister concern from borrowed capital without interest – Loan was advanced out of commercial expediency – Reopening of assessment on the ground that interest claimed on borrowed capital is not allowable and hence, escaped assessment – Reassessment notice and order disposing the objection is quashed.[S. 36(1)(iii), 148, Art. 226]

    Hon’ble High Court has held that the assessee had advanced loan to its sister concern as a measure of commercial expediency by using borrowed funds, interest on such borrowed funds was to be allowed as deduction under section 36(1)(iii). Thus, reopening of assessment on the ground that interest claimed on borrowed capital was not allowable under section 36(1)(iii) was not justified. (AY.2009-10)Vaman Prestressing Co. Pvt. Ltd. v. Addl. CIT (2023) 295 Taxman 252 / (2024) 461 ITR 192 (Bom) (HC)

48. S.147: Reassessment – With in four years – Undisclosed investment – Not recording of independent satisfaction – Reassessment notice and order disposing the objection is quashed. [S.69B, 148, Art. 226]

    When the detailed reasons, such as the nature of the transaction, date of transactions, and name of the party with whom the transaction was entered into, were not provided – the reopening of an assessment was not justified. Unless the AO records his independent satisfaction in the reasons recorded based on information received and communicates the same to the assessee, the right of the assessee to file objections would remain an empty formality.(AY. 2017-18)Paresh Babubhai Bahalani v. ITO (2024) 296 Taxman 324 (Guj)(HC)

49. S. 147 : Reassessment – Audit objection – Corporate Social responsibility – Reopening of assessment on perusal of the records available during the course of assessment proceedings – Amounts to change of opinion – Reassessment notice and order disposing the objection is quashed. [S. 37(1), 148, Art. 226]

    Allowing the petition the Court held that the AO after satisfying himself with the correctness of the claim made in the return has passed the assessment order without any addition or disallowance and on the basis of the same records, issuance of notice under section 148 of the Act tantamount to be on the basis of the change of opinion which is impermissible in the eyes of law. (AY. 2017-18)Adani Power Rajasthan Ltd. v. Asst. CIT (2023) 150 taxmann.com 136 / (2024) 461 ITR 210 (Guj)(HC)

50. S. 148 : Reassessment – Notice – Income escaping assessment – General (Non-application of mind) – reasons for reopening pertained to another entity and not assessee – wrong facts to come to a belief

    Assessing Officer issued reopening notice on ground that assessee had not disclosed a property transaction of purchase of property from a company, since said property transaction pertained to another entity and not of assessee and Assessing Officer in order disposing objections did not deal with said factual position, impugned reopening notice was to be set aside.Paranjape Schemes (Construction) Ltd. v. Dy. CIT (WP Nos. 3459 OF 2022 & 154 OF 2024) (Bom- HC)

51. S. 148 : Reassessment – Notice – Notice issued in the name of dead person – Not enforceable in the eyes of law – The legal heirs are under no statutory obligation to intimate the death of the assessee to the department – Requirement of issuing notice to a correct person is not a merely a procedure requirement but is a condition precedent the impugned notice being valid in law – Notice is held to be null and void.[S. 10(37), 144. 147, 292BB, Art. 226]

    Income tax return is processed and accepted. Later on, the Assessing Officer issued the notice u/s 148 in the name of dead person. The assessee died before the issuance of notice is not disputed. On writ the Court held that the legal heirs are under no statutory obligation to intimate the death of the assessee to the department. The sine qua non for acquiring jurisdiction to reopen an assessment is that such notice should be issued in the name of correct person, the notice issued in the name of the dead person is also not protected either by the provisions of section 292B or 292BB of the Act. Relied on Sumit Balkrishna Gupta v. ACIT (2019) 103 taxmann.com 188 / 262 Taxman 61/ 414 ITR 292 / 104 CCH 0379 (Bom. HC), Alamelu Veerappan v. ITO (2018) 95 taxmann.com 155/257 Taxman 72/102 CCH 0118 (Chennai HC), Savita Kapila v. ACIT (2020) 118 taxmann.com 46 / 273 Taxman 148 / 426 ITR 502 / 108 CCH 0049 (Delhi HC), Jaydeep kumar Dhirajlal Thakkar v. ITO (2018) 401 ITR 302 / 101 CCH 0085 (Guj.) referred. (AY. 2016-17) 

    Devendra v. Add CIT (2023) 294 Taxman 550 / (2024) 461 ITR 463 (Bom)(HC)

52. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Alternative remedy – The High Court dismissed the writ filed by the assessee against the assessment order with direction to avail alternative available under the Act as the assessee had failed to point out any procedural irregularity or illegality in the proceedings.[S. 148A(b), 148A(d), Art. 226]

    The assessee filed writ challenging the order passed by the AO u/s. 148A (d) of the Act and consequential assessment order. However, the assessee failed to point out any irregularity or illegality in the proceedings. The High Court noted that the AO had passed well-reasoned assessment order based on facts and evidences. Hence, in view of alternative remedy available to the assessee, the High Court dismissed the writ petition filed. (AY.2016-17)Shyam Sundar Dhanuka v. UOI (2023) 156 taxmann.com 499 /(2024) 461 ITR 25 (Cal)(HC) Editorial : Order of single Judge is affirmed Shyam Sundar Dhanuka v .ITO (2024) 461 ITR 22 (Cal) (HC)

53. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Advanced loans- Alternative remedy – Writ petition is dismissed. [S. 131(IA), 148A(b), 148A(d), Art. 226]

    Assessee is a partnership firm and filed its return of income for AY 2019-20 declaring total income of Rs. NIL. DIT(Inv.), Ghaziabad issued summons u/s. 131(1A) requiring petitioner to furnish details and purpose of loan advanced to two ladies of Rs. 1.75 Crores. Subsequently, Notice u/s. 148A(b) issued upon the assessee firm that income not commensurate with transaction of Rs. 1.75 Crores, to which the petitioner filed reply on 27.03.2023. AO passed Order u/s. 148A(d) rejecting the objections and issued Notice u/s. 148. High Court observed that detailed adjudication on the merits of information available with the AO at the stage of passing order under section 148A(d) of the Act. Merits of the information referable to Section 148A thus remains subject to the reassessment proceedings initiated vide notice u/s. 148 of the Act. The scope of decision under section 148A(d) is limited to the existence or otherwise of information which suggests that income chargeable to tax has escaped assessment. High Court relied on the decision of Hon’ble Supreme Court in the case of Anshul Jain v. PCIT [2022] 499 ITR 256 (SC) whereby it was observed that if the petitioner had any grievance on merits, the same has to be agitated before the AO during the reassessment proceedings and interference of Court is not called for. Writ petition was dismissed accordingly.(AY. 2019-20)Sidhbali Kripa Enterprises v. ITO (2024) 296 Taxman 32 (All) (HC)

54. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Unexplained expenditure – Bogus purchases) – No opportunity of personal hearing granted – Violation of principle of natural justice – Matter remanded – The assessee is directed to file objections with supportive documents. [S. 148A(b) 148A(d), Art. 226]

    On writ the The Hon’ble High Court observed that the assessee was not provided the opportunity of personal hearing. Therefore, the assessing officer while passing the order under section 148A(d) violated the principles of natural justice. Accordingly, the Hon’ble HC held that the order passed under section 148A(d) is to be treated as a notice under section 148A(b). Further, the Hon’ble High Court directed the assessee to file further objection along with supportive documents and the assessing officer to pass fresh order after granting opportunity for personal hearing.(AY. 2019-20)Nitin Agarwal v. ITO (No. 2) (2024) 460 ITR 323 (Cal) (HC)

55. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Unexplained investments – Notice not disclosing the additions to be made – Matter remanded.[S. 69A, 148A(b), 148A(d), Art. 226]

    Held that that there was no specific documents based on which allegation of escaped income was raised. Except for description of unexplained investment with respect to land and vehicle and amount of escaped income proposed, nothing else was stated. As sufficient material regarding assets on which investments were alleged to have been made were not disclosed in notice under section 148A(b) and also, a corrigendum containing specification with respect to unexplained investments was issued by department more than two months after order under section 148A(d) was passed which vitiated order. Order under section 148A(d) of the Act is quashed. Directed to pass the order after giving a reasonable opportunity to the appellant.Lakhendra Kumar Raushan Lakhendra Kumar Roushan v. PCIT (2024) 296 Taxman 526 (Patna) (HC)

56. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Disputed question of facts – Beneficiaries of cash transactions – Writ petition is dismissed.[S.69C, 132, 148A(b), 148A(d), 269D, 269SS, Art. 226]

    AO passed order u/s. 148A(d) on the basis of information received that the assessee was one of the beneficiaries of cash transactions of one finance broker whose premises were searched. On writ the Court held that the Assessing Officer had thoroughly examined the information, decoded the data and hence, it cannot be stated that the order passed under clause (d) of section 148 is a non-speaking order nor the order to be branded as outcome of non-application of mind. The Divisions Bench upheld the order passed by the Single Judge Bench on the ground that the Assessing Officer had passed well-reasoned order and the questions raised by the assessee involved disputed questions of facts. The Court also observed that there were several stake holders in the entire process which required deeper probe into the matter and such an exercise could not be done in exercise of writ jurisdiction.(AY. 2016 -17)Shyam Sundar Dhanuka v. UOI (2023) 156 taxmann.com 499 (2024) 461 ITR 25 (Cal)(HC) Editorial : Shyam Sundar Dhanuka v. UOI (2024) 461 ITR 22 (Cal)(HC), Order of single judge.

57. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Violation of principles of natural justice – Notice and order is quashed – The Assessing Officer may proceed to issue notice as per law by providing a reasonable opportunity of hearing to the assessee. [S. 148A(b), 148A(d), Art. 226]

    The assessee, a senior citizen, was issued notice u/s. 148A(b) for A.Y. 2015-16 but the same was not responded. Hence, the AO passed order u/s. 143(d) and issued notice u/s. 148. During reassessment proceedings, the assessee called for details related to investment in property, deposits, etc as the assessee had denied of having carried any such transactions. Without providing details requested, the AO completed the assessment. Hence, the assessee challenged proceedings u/s. 148A, issue of notice u/s. 148 and consequential assessment order, notices issued. The High Court allowed the petition and set aside the impugned orders with direction to pass fresh orders after providing required details and complete the assessment. The High Court held that orders should always be speaking orders safeguarding the interests of both the assessee and the Revenue. (AY. 2015-16)(SJ)Gubbi Chandananda Jagadeesh v. NFAC (2024) 461 ITR 10 (Karn)(HC)

58. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Mere failure to file reply cannot be the ground to issue notice u/s 148 – Even in ex-parte order, the authority has to record reasons for coming to a conclusion as to why the case has been taken out for re-opening of the assessment – Matter restored to the Assessing Officer to the stage of notice u/s. 148A(b) of the Act. [S. 148, 148A(b), 148A(d) Art. 226]

    The assessee did not file its reply to notice issued u/s. 148A (b) of the Act for A.Y. 2018- 19 even though 3 adjournments were granted. Therefore, the AO passed order u/s. 148A (d) on account of default of the assessee in not submitting the reply to the show cause notice considering it was a fit case to issue notice under section 148 of the Act. The AO also passed consequential assessment order. The assessee challenged under writ the order passed u/s. 148A (d) as it was non-speaking and also the assessment order passed u/s 147. The High Court held that even in an ex parte proceedings, the authority has to record reasons for coming to a conclusion as to why the case has been taken out for re-opening of the assessment. The matter was restored to the AO at the stage of notice u/s. 148(b) of the Act but the assessee was precluded from raising issue related to limitation.(AY. 2018-19)GSP Piling Constructions (P.) Ltd. v. ACIT (No 2) (2023) 156 taxmann.com 665 (2024) 461 ITR 59 (Cal)(HC)

59. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Cash deposits – Cash was withdrawn and redeposited in the bank account – No tangible material – Reassessment notice is held to be bad in law.[S.148, 148A(b), 148A(d), Art. 226]

    Allowing the petition the Court held that AO wanted to verify the cash deposited in the bank account of the assessee by disregarding the explanation of the assessee on the ground that no prudent businessman will simply withdraw crores of cash from his bank account and again will deposit it at various stage. This is merely personal opinion of the AO. However, for the purpose of reopening an assessment there should be a tangible material placed by the assessing officer to show that there was escapement of income from the payment of income tax. This being conspicuously absent, notice issued under section 148 of the Act is bad in law. (AY.2017-18)Dinesh Kumar Goyal, HUF v. ITO (No. 2) (2024) 461 ITR 113 (Cal)(HC)

60. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Premature – Before issue of notice u/s 148 – Writ petition is dismissed. [S.148, 148A(b), 148A(d), Art. 226]Dismissing the petition the Court held that the order under section 148A(d) is at a stage prior to issuance of notice under section 148. Unless glaring omissions are demonstrated or the conditions precedent for exercise of the power to reopen assessment are not complied with, a writ court would not ordinarily interfere with an order passed under section 148A(d) inasmuch as the proceedings are at a very nascent stage even prior to issuance of the statutory notice under section 148. (AY. 2015-16)Yellaiah Setty v. Asst. CIT (2024) 461 ITR 107 (Telangana)(HC)
61. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Matter restored to the AO as the main contention of the assessee that it had not claimed any deduction for such liability was not considered while passing order u/s. 148A (d) of the Act. [S. 148A(b), 148A(d), Art. 226]

    The AO had sought to reopen the assessment in respect of the increase in liability to pay Works Contract Act noted by him as income escaping assessment. The assessee replied that no deduction was claimed in respect of impugned liability. However, the AO passed order u/s. 148A (d) of the Act without dealing with this submission. Court held, that the Assessing Officer had not considered the crucial fact that the assessee had never claimed deduction concerning unpaid taxes. The order passed under section 148A(d) was set aside. The Assessing Officer was to accord opportunity of personal hearing to the assessee and carry out a de novo enquiry (AY. 2016-17)Alankar Apartments (P.) Ltd. v. DCIT/(2023) 151 taxmann.com 67 / (2024) 461 ITR 53 (Delhi)(HC)

62. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – No violation of principle of natural justice – Loan transactions – Question of fact – Writ petition is dismissed. [S. 69C, 148A(b), 148A(d), Art. 226]

    The assessee sought to challenge the order passed u/s. 148A(d) of the Act on the ground that reopening was sought based on report of Directorate General of Income-tax (Investigation) wherein some remark was made as ‘potential borrower/lender’. However, the Court noted that the said order referred to cash loans being availed by the assessee from finance broker named Kaseras attracting provisions of section 69C, 269SS, 269T and other related penal provisions of the Act. Court also noticed that order was well reasoned and there was no violation of principles of natural justice nor order lacked inherent jurisdiction. Hence, considering case involved scrutiny of facts, evidence, Court declined to interfere. Court also directed to cause enquiry of person who affirmed the petition on behalf of the assessee. (AY. 2016-17)Shyam Sundar Dhanuka v. ITO (2024) 461 ITR 22 (Cal)(HC)Editorial : Affirmed by division bench, Shyam Sundar Dhanuka v. UOI (2023) 156 taxmann.com 499 /(2024) 461 ITR 25 (Cal)(HC)

63. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Resident of Uganda – Mutual fund investment – Source of investments coming from Non-Resident External Accounts Beyond Reach Of Authorities – No Tangible material for belief that income had escaped assessment – Notice not valid.[S.10(4), 148, 148A(b), 148A(d), Art. 226]

    The AO sought to reopen the assessment of the assessee, who was resident of Uganda, on the basis of information received that the assessee had indulged in transactions of time deposits and mutual fund investments but did not file return of income. The assessee submitted all the related details before the AO. However, the AO passed order u/s. 148A(d) holding that it was a fit case for issuance of notice u/s. 148 of the Act. The assessee challenged the same under Writ. The High Court accepted the contentions of the assessee that all investments were from non- resident (External) accounts and could not be subject of tax in accordance with the provisions of section 10(4) of the Act. Accordingly, the High Court held that impugned order was without jurisdiction.(AY. 2018-19)Nitin Mavji Vekaria v. ITO (2024) 461ITR 18 (Guj) (HC))

64. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – Limitation – Notice issued after three years – Barred by limitation- Travel back in time theory unsustainable – That the principle of constructive res judicata was not applicable. The orders passed under section 148A(d) and the consequent notices issued for the assessment years 2016-17 and 2017-18 under the amended provisions of section 148 of the 1961 Act were unsustainable. [S. 148, 148A(b), 148A(d), 149, Art. 142, 226]

    The notice issued under section 148 was issued for AY 2016-17 on 30 June 2021 and for AY 2017-18 was issued on 28 June 2021. There after, pursuant to the judgment of UOI v. Ashish Agrawal (2022) (444 ITR 1) (SC) order under section 148A(d) was passed. On appeal to the Hon’ble Delhi High Court, it was held that as per the new 148 provision, the time to complete the reassessment proceedings for income which is less than 50 lakhs should be within 3 years from the relevant assessment year. In the instant case the re-assessment proceedings were time- barred as limitation period of three years for the relevant assessment year since the notice issued for post June 2021. Hence, the orders issued under Section 148A(d) and the notice under Section 148 of the amended 1961 Act, for AY 2016-17 and AY 2017-18 are not valid.(AY. 2016 -17, 2017-18)Ganesh Dass Khanna v. ITO (2023) 156 taxmann. com417/ 335 CTR 881 / (2024) 460 ITR 546 (Delhi) (HC)

65. S. 153A: Assessment – Search – Assessment prior to search – Order of High Court is affirmed – SLP of Revenue is dismissed.[Art. 136]

    High Court held that where assessment of assessee had attained finality prior to date of search and no incriminating documents or materials had been found and seized at time of search, no addition could be made under section 153A as case of assessee was of non- abated assessment. The Hon’ble Supreme Court, keeping in view, its decision of Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399/293 held that no case for interference is made out. Hence, SLP was dismissed. (AY. 2010-11, 2011- 12)PCIT (Central) 2 v. Jay Ambey Aromatics (2023) 156 taxmann.com 691 / (2024) 296 Taxman 475 (SC)

66. S. 154 : Rectification of mistake – Mistake apparent from the record – Inadvertently disclosed income in its return – Return was accepted u/s. 139(1) – Rectification is rejected – Tribunal allowing the claim – Dismissing the appeal the Court held that merely because respondent included the income in the return as taxable cannot make it amenable to imposition of tax- DTAA-India-USA. [S. 139(1), 143(1), 260A, Art. 14]

    The assessee filed its return of income for AY. 2018-19 disclosing income received from Heidrick and Struggles India P. Ltd. under the head ‘Income from other sources’. The return was processed u/s. 139(1) of the Act by CPC. The assessee sought its rectification in view of provisions of Article 14 of Indo-USA DTAA. However, CPC rejected the same and CIT(A) confirmed view taken by CPC. However, the Tribunal in view of Circular 14 dated 11.04.1955 and also rectification having accepted by CPC in two other group companies viz. Heidrick and Struggles Pvt. Ltd, Singapore and Heidrick and Struggles P. Ltd. UK, allowed the appeal filed by the assessee. The Revenue filed belated appeal before the High Court. After condoning the delay, the High Court dismissed appeal holding that circular 14 was applicable in the case of the assessee and merely because respondent assessee placed the income under wrong head, cannot possibly make it amenable to imposition of tax. (AY. 2018-19)CIT (IT) v. Heidrick and Struggles Inc. (2024) 461ITR 33 (Delhi)(HC) Editorial : Followed CBDT Circular 14 of 1995 dated 11.04.1995.Referred CIT v. Bharat General Reinsurance Co. Ltd. (1971)81 ITR 303 (Delhi)(HC)

67. S. 176: Discontinued Business – Company struck off from official register of companies – Reassessment – Directors – Reassessment proceedings against the Directors in case of struck companies. S. 176 is applicable only when the company has discontinued the business. [S. 147, 148, 176(5), 176(7), Companies Act Art. 226] The petitioner/assessee was the Director of the Speed & Safe Freight Systems India Private Limited and the said Company was struck-off from the official register of companies with effect from 29-10-2019. He received a notice under section 148 on 31-3-2021 for reopening of assessment for the relevant assessment year 2015-16. On writ petition, the assessee submitted that the assessment order could not be reopened against the company, which was already struck- off. It was only after the revival of the Company, the Authority would get power to reopen the assessment and pass further orders. For this the respondent/revenue would have to file an application for revival under section 252 of the Companies Act, read with rules 11 and 87 of the NCLT Rules, within the period mentioned therein. However, the impugned order was passed by the revenue without application of mind. Hence, the said impugned order was liable to be quashed.Where a company is struck off, the reassessment proceedings against it can only be initiated by its revival. The department cannot initiate the reassessment proceedings against the Directors in case of struck companies. S. 176 is applicable only when the company has discontinued the business. (AY. 2015-16) (SJ)Pandian Anbalagan v. ITO (Mad.)(2024) 296 Taxman 499 (Mad)(HC)
68. S. 179: Private company – Liability of directors – Order against Ex-director of company – No steps were taken to recover dues from the company – Order is set aside. [Art. 226]

    The assessing officer issued notice to the assessee holding him in his capacity as a director, after period of nine years post the resignation of the assessee, responsible for the outstanding demand against the company.On writ the Hon’ble High Court held that the order passed under section 179 ought to have indicated material particulars as regards to the steps taken by the Assessing Officer for the purpose of recovering the tax from the company. Accordingly, the show cause notice issued by the assessing officer was held to be defective as the condition precedent for taking action under section 179 was not satisfied. Accordingly, the order passed under section 179 was quashed and set aside. (AY. 2006-07 to 2009-10, 2011-12)Bhailal Babubhai Patel v. PCIT (2024) 460 ITR 226 (Guj)(HC)

69. S. 194C: Deduction at source – Contractors – Technical services – Processing of milk attracts deduction of tax at source under section 194C at 2 per cent is rightly deducted – Order of Tribunal is affirmed.[S. 40(a)(ia), 194J, 260A]

    The assessee, engaged in the business of selling milk and milk products, made payments to a dairy for conversion of raw milk into processed milk and milk products. It deducted tax at source @2% under section 194C treating payments to be contract payments. However, the assessing officer made disallowance under section 40(a)(ia) holding that the payments were in the nature of payments for technical services and therefore, tax should have been deducted @10% under section 194J. However, the Commissioner of Income-Tax (Appeals) deleted the disallowance made by the Assessing Officer. On appeal by Revenue, the Hon’ble Tribunal upheld the CIT (A) order and held that the CIT(A) has rightly deleted the disallowance made by the Assessing officer. On appeal by the Department, the Hon’ble Gujarat High Court held that the Hon’ble Tribunal relied on the decision of the co-ordinate Bench in the assessee’s own case wherein, relying on CBDT Circular No. 13/2006 dated 13 December 2006(2006) 287 ITR 174 (St) wherein it held that the services provided by the dairies are in the nature of job work which falls within definition of ‘work’ under section 194C. The services are neither technical nor managerial nor consultancy since the dairies are not assigned any exclusive work relating to quality check and therefore, the main and basic nature of transaction of conversion/processing of milk on job work basis does not lose its true characteristic. Accordingly, the Department’s appeal is dismissed.PCIT v. Maahi Milk Producer Co. Ltd. (2024) 460 ITR 222 (Guj) HC)

70. S.194N: Payment of certain amounts in cash – Withdrawal of cash in excess of Rs. 1 crore – Representation to Government – The High Court directed the MOF and CBDT to examine representation, call for related details/supporting documents, provide full opportunity of hearing to all stakeholders and pass reasoned order dealing with each contentions in accordance with law and until such exercise is taken, restrain from taking any coercive recovery u/s. 194H of the Act.[S. 119, Art. 226]

    The State of Tamil Nadu had filed representations to Minister of Finance and CBDT to grant exemption to PACCS from the provisions of Section 194N of the Act in the similar manner it was granted to commission agent or trader operating under Agriculture Produce Market Committee and registered under related law. The exemption was sought for the reason that the interest spread of PACCS was very marginal and deduction of tax at source would create cash crunch besides eating all its income. The High Court directed the MOF and CBDT to examine representation, call for related details/supporting documents, provide full opportunity of hearing to all stakeholders and pass reasoned order dealing with each contentions in accordance with law and until such exercise is taken, restrain from taking any coercive recovery u/s. 194H of the Act. (SJ)A.2979 Thirumohur Primary Agricultural Co- operative Credit Society Ltd. and Others v. ITO (2024)461 ITR 69 (Mad)(HC)

71. S. 194C : Deduction at source – Contractors – Work contracts – Payments for testing and commissioning of BTG and to CIPL for installation and commissioning of BOP – Rightly deducted under section 194C and not under section 194J. [S. 194J, 201] The AO view that payments were made to BHEL for testing and commissioning of BTG and to CIPL for installation and commissioning of BOP and since said services were technical, the tax was to be deducted u/s. 194J. He passed the order u/s.201 and held assessee to be in default for short deduction of TDS and consequently, raised demand. CIT(A) up held the order. Tribunal delted the addition . On appeal the High Court Held that, element of testing and commissioning of technical works etc. were part of main contract-to set up a thermal power plant including therein work of transportation, insurance, erection, installation, testing and commissioning of BTG and also commissioning of BOP, in absence of any internal tool arising therefrom and in absence of any legal provision allowing AO to break down composite nature and character of the contract. The Contracts executed with BHEL and CIPL were indivisible contracts for BTG and BOP, respectively. The dominant object of the contract could not be overlooked, and thus, TDS was required to be made u/s. 194C and not under section 194J. (AY. 2012-13, 2013-14, 2015-16)CIT (TDS) v. Lalitpur Power Generation Co. Ltd. (2024) 296 Taxman 372 (All)(HC)
72. S. 220: Collection and recovery – Assessee deemed in default – Stay – Attachment of bank accounts – The Revenue was directed to lift attachment so far as pension of the assessee concern and he was allowed to withdraw pension – Embargo on the petitioner from withdrawing any other amounts deposited in the attached account was continued with direction to appellate commissioner to dispose appeals within 3 months from the date of the High Court’s order.[Art. 226]

    The bank accounts of the assessee were freezed for recovery of demand for A.Ys. 2007-08, 2008-09, 2010-11 and 2013-14. The appeals filed before the Tribunal for A.Ys. 2008-09 and 2010- 11 were dismissed whereas the appeals for A.Y. 2010-11 and 2013-14 were restored to the file of Appellate Commissioner. The assessee, under writ filed earlier, was required to pay tax demand in instalments but could pay only first instalment. The Department declined to release the bank accounts attached. Hence, the assessee approached High Court for release of bank account. The High Court, after taking into consideration that the assessee besides pension also received amounts from other concerns, held that pension amount could not be attached. The High Court directed the Revenue to allow the assessee to withdraw pension and dispose pending appeals within 3 months from the date of the order. (AY. 2007-08, 2008-09, 2010-11, 2013 -14) (SJ)G. K. Reddy v. DCIT (No. 1) (2023) 461 ITR 42/ 156 taxmann.com 729 (Mad)(HC) Editorial: Refer G. K. Reddy v. Dy. CIT (No. 2) [2024] 461 ITR 104 (Mad)(HC)

73. S. 220: Collection and recovery – Assessee deemed in default – Stay – Attachment of bank accounts – Attachment of bank accounts- Attachment of pension account to recover the outstanding dues – not justified.On appeal the Division bench , has directed the Revenue to lift the attachment of the bank account wherein the pension of the assessee was credited by observing that entire pension amount with arrears was lying in pension account and only a certain sum lying in that account related to other amount. Hence, assessee was permitted to operate pension account and make transactions with amount lying therein, excluding sum which pertained to other amount.( AY. 2007-08, 2008-09, 2010-11, 2013-14)G. K. Reddy v. Dy. CIT (No. 2) [2024] 461 ITR 104 (Mad)(HC)Editorial: Refer, G. K. Reddy v. DCIT (2023) 461 ITR 42/ 156 taxmann.com 729 (Mad)(HC) 
74. S. 221: Collection and recovery – Penalty – Tax in default – Dues payable to creditors for periods preceding the date of approval of the Resolution Plan can only be paid as per terms contained therein and therefore, demand recovery notices and consequent orders issued for preceding period are unsustainable in law and unenforceable. [S.143(3), 147, 148, 153A, 221(1), 271(1)(c), Insolvency and Bankruptcy Code, 2016, S. 31, 238, Art. 226]

    The assessee had acquired Bhushan Steel Ltd. in terms of the corporate insolvency resolution proceedings under the Insolvency and Bankruptcy Code, 2016. Subsequently, the assessee was in receipt of a notice under section 221(1) of the Act demanding payment of tax in respect of the acquired company. Upon filing of a writ by the assessee, the Hon’ble Delhi High Court held that dues payable to creditors, including statutory creditors, for periods preceding date of approval of the resolution plan, can only be paid as per terms contained therein. Further, it was also held that where no provision is made for claims lodged on behalf of creditors or there is failure to lodge a claim with Resolution Professional, all such claims stand extinguished and the successful applicant whose plan has been approved should not be put in a position where it is called upon to liquidate dues which were not embedded in plan since, in law, the successful applicant is provided with a ‘clean slate’. Accordingly, dues for period prior to date when Resolution Plan was approved cannot be recovered and therefore, demand recovery notices and consequent orders issued for preceding period are unsustainable in law and unenforceable.(AY. 2001-02, 2009-10, 2011- 12, 2013-14) Tata Steel Ltd. v. Dy.CIT (2024) 460 ITR 595 (Delhi HC)

75. S. 234A : Interest – Default in furnishing return of income – Self assessment tax paid was to be deducted from the tax payable as per the assessment order for the purposes of calculating interest payable – No substantial question of law.[S. 140A, 260A]

    The Tribunal held that the self-assessment tax paid was to be deducted from the tax payable as per the assessment order for the purposes of calculating interest payable 234A. High Court dismissed the appeal of the Revenue on the ground that no substantial question of law. (AY. 1996-97)CIT v. I.T.C. Ltd. (2015) 64 taxmann.com 486 / (2024) 461 ITR 449 (Cal)(HC) Editorial : CIT v. I.T.C.Ltd (2024) 461 ITR 446 ( SC), order of High Court is set aside and remanded for fresh disposal on merits .

76. S. 237 : Refunds – Interest on refunds – Public money – Technical issues at the Centralized Processing Center (CPC) – The High Court reprimanded the Department, stating that the interest is payable in law until the date of refund, and the Department failed to realise that it is the public money used to pay interest, which is a burden on the exchequer. A copy of the Order was asked to be sent to the Honourable Prime minster , The Hon’ble Finance Minister GOI, The Hon’ble Law Minister, the Central Board of Direct Taxes and to the Attorney General for India for information and necessary action.[S. 244A, Art. 226]

    The petitioner filed the writ petition for failure to issue refund with interest. Department contended that the interest the system under the control of Centralized Processing Center (“CPC”), Bangalore has some issues and, therefore, amount is not being released to assesses. Allowing the petition the Court held that, the standard excuse given by the Income Tax Department is that the refund cannot be processed due to technical issues at the CPC. The High Court reprimanded the Department, stating that the interest is payable in law until the date of refund, and the Department failed to realise that it is the public money used to pay interest, which is a burden on the exchequer. A copy of the Order was asked to be sent to the Honourable Prime minster, The Hon’ble Finance Minister GOI, The Hon’ble Law Minister, the Central Board of Direct Taxes and to the Attorney General for India for information and necessary action. The Court also directed the respondents either by itself or through CPC shall ensure that the amount is credited to Petitioner’s account on or before 4th November 2023 with interest up to the date of payment in accordance with law. (AY. 2020-21)Matrix Publicities and Media India (P.) Ltd(2024) 296 Taxman 85 (Bom.)(HC)

77. S. 245C : Settlement Commission – Settlement of cases – Conditions – Retrospective amendment made by the Finance Bill, 2021 – Pending applications – last date for filing of application in Section 245C(5) should be read as 31-03-2021 instead of 01-02-2021 and consequently the last date mentioned in the circular should also be read as 31-03-2021 and thus, the pending applications between 01-02-2021 to 31-03-2021 and as on 31-03-2021 should be deemed as pending applications for purposes of consideration by Interim Board – Court cannot substitute its opinion to abolition of Settlement Commission. [S. 245A, 245C(5), 245D(11), Art. 226]

    Petitioner challenged the constitutional validity of amendment to Section 245A discontinuing operations of Settlement Commission w.e.f. 01-02-2021. Petitioner also challenged the validity of Circular No. P. No. 299/22/2021-Dir(Inv.III), dtd. 28-09-2021 – The Court observed that neither there was any intent nor it was within purpose to do away with pending applications of cases from 01-02-2021 to 31-03-2021. The Court held that last date for filing of application in Section 245C(5) should be read as 31-03-2021 instead of 01-02-2021 and consequently the last date mentioned in the circular should also be read as 31-03-2021 and thus, the pending applications between 01-02-2021 to 31-03-2021 and as on 31-03-2021 should be deemed as pending applications for purposes of consideration by Interim Board. Followed, CIT v. Shah Sadiq & Sons (1987) 31 Taxman 498 / 166 ITR 102 (SC) and UOI v. Tushar Ranjan Mohanty (1994) 5 SCC 2020. The Right to seek resolution through Settlement Commission conferred by Statute, within policy realm of State to make away remedy or benevolence. The Court also held that the Court cannot substitute its opinion to abolition of Settlement Commission.Jain Metal Rolling Mills v. UOI (2024) 296 Taxman 336 / 461 ITR 423 (Mad)(HC)

78. S. 245C : Settlement Commission – Settlement of cases – Conditions – Jurisdiction- Rejection of application – Order of rejection is valid – Court can only ensure proper implementation of law by statutory authority – Not duty of court to legislate or issue any circular or notification.[S.119(2)(b), Art. 226.

    On writ the Court held that Settlement Commission ceased to operate w.e.f. 01-02-2021 in view of the amendment made by the Finance Act, 2021. Application for settlement of case filed on 17-03-2021, which has been rejected, the order passed by the Settlement Commission was in accordance with law and was legal and valid. Circular and Notification No.: CBDT Order P. No. 299/22/2021-Dir(Inv.III), dtd. 28-09-2021 (2021) 438 ITR 5 (St) and Press Release dated 07-09-2021. Court also held that Court can only ensure proper implementation of law by statutory authority. Not duty of court to legislate or issue any circular or notification. (AY. 2013-14 to 2018-19) (SJ)Pradeep Kumar Naredi v. UOI (2022) 138 taxmann. com 378 / (2024) 461 ITR 414 (Cal)(HC) Editorial : Refer, Pradeep Kumar Naredi v. UOI (2024) 461 ITR 418 (Cal) (HC) RSB Industies Ltd v. UOI (2024) 461 ITR 418 (Cal)(HC)

79. S.254(1): Appellate Tribunal – Duties – Revision of orders prejudicial to revenue – Losses in speculation business –Tribunal quashing the order of Revision – Documents placed before the Tribunal is not placed before the Commissioner – Matter remanded to the file of the Commissioner. [S. 73(1) 263]

    The AO had passed assessment order allowing the set off of derivative loss against the business income. The said order was sought to be revised by the CIT. However, in spite of giving opportunity, the assessee did not appear before the CIT. Hence, the CIT passed revisional order which was challenged before the Tribunal. The Tribunal held CIT had no jurisdiction as this aspect was examined by the AO during assessment proceedings. The Tribunal recorded argument of the advocate of the assessee that there was no bar under the Act allowing such set off but it did not give any finding about correctness of such submission. The Revenue challenged the order of the Tribunal in further appeal. The High Court held that since the Tribunal has not given a specific finding as to how there is no bar under the Income Tax Act for setting off of derivative loss against business income in the facts and circumstances of the case, the matter has to be freshly decided by the CIT. (AY. 2017-18)PCIT v. Manindra Mohan Mazumdar (2023) 150 taxmann.com 116 (2024) 461 ITR 56 (Cal)(HC)

80. S. 254(2): Appellate Tribunal- Rectification of mistake apparent from the record-Limitation of six months – Ex-parte hearing by ITAT and recalling Ex-parte orders – Time limit of 6 months not to apply – Order of Tribunal is set aside. [S. 253(3), ITAT R. 1963, 24, Art. 226]

    Assessee filed Application before Tribunal to recall Ex-Parte Order passed by ITAT as notice of hearing could not be served upon the assessee. Said application was dismissed by the Tribunal by holding that the application was barred by limitation as per time limit provided under section 254(2) of the Act. On Writ the Honourable High Court allowed the Writ of the assessee after relying on the Judgment of Delhi High Court in the case of Cement Corporation of India Ltd v. ACIT (2023) 149 taxmann.com 192/ 456 ITR 61 (Delhi)(HC), by holding that when Tribunal decides a case Ex-Parte for want of prosecution on the part of the Appellant, Appellant can afterwards file an Application under Rule 24 of the ITAT Rules, and the limitation u/s. 254(2) of the Act would not apply and reliance on Section 254(2) of the Act was misplaced as the assessee never sought for rectification of the Order. Matter was remanded back to the Tribunal for fresh order.Purnagiri Rice Mill v. UOI (2024) 296 Taxman 507 (All) (HC)

81. S. 254(2): Misc Application – mistakes in the order – No opportunity given to assessee to argue alleged violation of rule 46A – In interest of justice matter remanded to CIT(A)

    The alleged violation of Rule 46A of the Income Tax Rules, 1962 (the Rules) ITAT has observed that during the course of the hearing before the ITAT. The procedure prescribed under Rule 46A of the Rules and call for a remand report. Thus instead of making the parties to go back and forth or devoting precious judicial time including in the appeals that have been filed by petitioner against the order dated 29th April 2022 passed by the ITAT, interest of justice would be meet if the matter is remanded to the CIT(A) for denovo consideration.Pravir Polymers Private Limited v. Income Tax Officer 15(2)(4) and Ors. Writ Petition No. 2440 Of 2023, Dated: 18/12/2023. (Bom.)(HC).

82. S. 260A: Appeal – High Court – Delay of 2139 days – Absence of sufficient cause – Delay is cannot be condoned.

    Dismissing the petition the Hon’ble court has held that the assessee was not vigilant rather negligent and there is lack of bona fide even in explaining the delay. The assessee had failed to demonstrate that there was “sufficient cause” for the delay in filing the Tax Case Appeal and thus the petition is liable to be dismissed.(AY. 2010-11)Siva Industries and Holdings Ltd. v. Asst. CIT (2024) 461 ITR 133 (Mad)(HC) Editorial : SLP dismissed, Siva Industries and Holdings Ltd. v. Asst. CIT (2024) 461 ITR 142 (SC)

83. S. 263: Commissioner – Revision of orders prejudicial to revenue – Cash credits – Opting VSV Scheme is closure of disputes – Revision order is bad in law reopened by issuing notice under section 263 for revising assessment order. [S. 68, 260A, Direct Tax Vivad Se Vishwas Act, 2020, S.4]

    AO passed assessment order making addition to the total income pertaining to the estimation of profit 8% of transactions of shares carried out during the year under consideration by the assessee on NSE. The Pr. CIT found the whole transaction of shares as unexplained and ordered fresh assessment. The Tribunal set aside the fresh assessment holding that the Pr. CIT was not justified to initiate proceedings. The Tribunal observed that Section 6 of the Direct Tax Vivad Se Vishwas Act, 2020, makes it very clear that once there is a compliance with the timeliness specified under section (5), the designated authority shall not institute any proceedings in respect of an offence or aims or levy any penalty or charge any interest under the Income-tax in respect of the tax arrears. The Hon’ble Gujrat High Court upheld the order of the Tribunal and held that it was not open for the authorities to initiate proceedings under section 263 of the Act, when they were barred. (AY. 2012-13)PCIT v. Swatiben Biharilal Parekh (Mrs.) (2023) 156 taxmann.com 267 / (2024) 296 Taxman 38 (Guj) ( HC)

84. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Cash credits – Share capital and share premium – Record- shall include and shall be deemed always to have been included all records relating to any proceedings under this Act available at the time of examination by the Ld. Pr. CIT or Commissioner – Order of Tribunal quashing the revision order is affirmed by High Court.[S. 68, 153A, 260A]

    The AO completed the assessment u/s. 143(3) for A.Y. 2009-10 on 28.03.2011. Search action was carried out at the premises of the assessee on 18.02.2013. The CIT exercised his jurisdiction u/s. 263 of the Act vide order dated 28.03.2013 as the AO had passed order without causing enquiries related to share capital and premium received thereon. The assessee challenged order passed u/s. 263 before the Tribunal. Meanwhile, the AO completed assessment u/s. 143(3) r.w.s. 153A on 23.03.2015 after causing necessary enquiries u/s. 133(6) of the Act in respect of share capital and premium received by the assessee. The Tribunal set aside the revisional order on 1.10.2019. In the miscellaneous application filed by the assessee, the Tribunal rejected the contention of the assessee that in light of the order passed u/s. 143(3) r.w.s. 153A the assumption of jurisdiction by the CIT was unsustainable. The Tribunal directed the CIT to consider the said contention raised by the assessee while passing order giving effect to the Tribunal. The CIT passed order dated 30.03.2021 ignoring the effect of the order passed u/s. 153A of the Act. Hence, the assessee filed further appeal before the Tribunal. The Tribunal held that where any proceeding is initiated in the course of assessment proceedings, having a relevant and material bearing on the assessment to be made and the result of such proceedings was not available with the Income-tax Officer before the completion of the assessment but the result came subsequently, the revising authority (PCIT) is entitled to look into the search material as it forms part of the assessment records of the particular assessment year. The Tribunal relying on the judgment of the High Court in the case of CIT v S. M. Oil Extraction (P) Ltd. [190 ITR 404 (Cal)] held that the CIT has to examine all the records pertaining to the assessment year at the time of examination by him, which includes in this case the post-search assessment proceedings dated 23-3-2015 and thereafter only if he finds that the order passed by the AO on any issue is erroneous in so far as it is prejudicial to the interest of the revenue, then only he may interfere by enhancing/modifying/ cancelling the assessment order. The appeal filed by the Revenue against the order of the Tribunal was dismissed and held that the order of the Tribunal did not need any interference. (AY.2009-10)PCIT v. Techno Tracom (P.) Ltd (2023) 293 Taxman 392/ (2024) 461 ITR 47 /150 taxmann.com 465 (Cal) ( HC)

85. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Expenditure on scientific research – Form 3CL filed but delay in intimation – Commissioner passed the revision order – Order of Tribunal quashing the Revision order is affirmed. [S. 35(2AB), 260A, Form No. 3CL]

    The Assessee claimed deduction u/s 35(2AB) but did not submit required evidence. Pr. CIT u/s 263 disallowed said deduction. Tribunal dismissed the order of the Pr. CIT. Revenue filed appeal. The Hon’ble Gujarat High Court observed that since the assessee has filed Form 3CL certifying his Research and Development (R&D) facility approved by the prescribed authority in proper format, merely because the authority failed to send the intimation during the course of assessment proceedings could not be the reason for denying the claim deduction under section 35(2AB) of the Act. It was held that The ITAT is correct in holding that the order of the A.O. is not erroneous and prejudicial to the interest of revenue. (AY. 2016-17)PCIT v. Schaeffler India Ltd. [2023] 155 taxmann.com 651 /(2024) 296 Taxman 210 (Guj)(HC) 

86. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Expenses or payments not deductible – Cash payments exceeding prescribed limits – Order of PCIT quashing the revision order is affirmed. [S. 40A(3)]

    AO issued reopening notice and upon recording reasons to believe, the assessment order was passed by making no addition. The PR. CIT issued show cause notice u/s 263 that it was a case under section 40A(3)  as cash withdrawals by the assessee was used for purchasing inventory. The Hon’ble Delhi High Court affirmed the order of the ITAT by observing that if the AO did not bring to tax the amount that was adverted to in the “reason to believe” framed in the first instance, then the PR. CIT could not have triggered proceedings for cash withdrawals under Section 263 of the Act. Hence, the appeal was closed. (AY. 2006-07)PCIT v. Prosperous Buildcon (P.) Ltd. [2023] 156 taxmann.com 446/(2024) 296 Taxman 255 (Delhi).

87. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Business of road infrastructure and development – AO allowed the claim made under section 80IA after detailed scrutiny – Revision of assessment order on the ground that the assessee is only a work contractor – Unjustified – Rule of consistency is followed. [S.80IA, 260A]Dismissing the appeal of the Revenue the Court held that the assessee has not only employed plant and machinery and other assets along with staff but also it had been bearing all risks involved in road infrastructure projects. Thus, assessee could not be treated a mere work contractor. Further, as the assessee was granted deduction under section 80IA in past assessment years and in further assessment year as well, Rule of consistency had to be applied and deduction under section 80IA is to be allowed in relevant assessment year also.(AY. 2012-13)PCIT v. MBL Infrastructure Ltd. (2024) 461 ITR 148 (Cal)(HC)Editorial : SLP of Revenue is dismissed, PCIT v. MBL Infrastructure Ltd. (2024) 461 ITR 150 (SC)
88. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Unexplained expenditure – Ad-hoc addition made by the Assessing Officer – Order of Tribunal quashing the direction of PCIT to do de novo assessment is affirmed. [S.69C, 26A]

    Assessee’s case selected for scrutiny assessment. AO passed order and made additions for disallowance of EPF contribution and ad hoc disallowance of 20 per cent of expenses. Pr. CIT, exercising his jurisdiction u/s 263 set aside the assessment order and directed for fresh assessment. Tribunal quashed the order of the Pr. CIT. Dismissing the appeal of the Revenue the Court held that the Pr. CIT has not disputed the existence of the parties and the purchases made or commission paid. No contrary evidence was placed on record to substantiate that the purchases made or commission paid is bogus. Therefore, substantial question of law was raised and the appeal was dismissed. (AY. 2014-15)PCIT v. Ramchandra Dahyabhai Narrow Fab (P.) Ltd. [2023] 155 taxmann.com 431/(2024) 296 Taxman 64 (Guj)(HC)

89. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Company – Book profit – Depreciation – Consistently charging depreciation in its books of account at rates prescribed in Income-tax Rules and accounts of assessee had been prepared and certified as per provisions of Companies Act, 1956 – A specific query was raised by Assessing Officer on issue of payment made to related party and verification of fair market value as per provision of section 40A(2)(b) and when answered – Order of Tribunal quashing the Revision order is affirmed. [S. 32, 40A(2)(b), 115JB, 260A]

    The PCIT exercising his powers u/s 263 called for revision of the order passed by the AO. The question before the Hon’ble Gujarat High Court was whether the issue of excess depreciation claimed on windmill @80% as prescribed under IT Act instead of the rate of 15.33% for a continuous plant as per companies Act for the purpose of calculation of book profit u/s 115JB of the IT Act was erroneous or not. Another issue to be considered was whether determination of fair market value u/s 40A(2)(b) of the Act in respect of payments made to related parties during the year under consideration was made without appreciating the facts of the case. The Bench held that the PR. CIT has erred in holding that the assessment order as erroneous since the asessee is allowed to claim higher depreciation under the Income Tax rules as against the rate mentioned in the Companies Act. In the second issue, the Bench followed the decision of the Hon’ble Supreme Court in Pr. CIT v. Shreeji Prints (P.) Ltd. [2021] 130 taxmann.com 294/282 Taxman 464 (SC) and held that the PR. CIT cannot hold the assessment order to be erroneous if the AO has made inquiries and accepted the genuineness a plausible view so taken. (AY. 2010-11)PCIT v. Kansara Popatlal Tribhuvan Metal (P.) Ltd. (2023) 156 taxmann.com 433/(2024) 296 Taxman 88 (Guj)(HC) 

90. S. 264 : Commissioner – Revision of other orders – Claim under section 80IA is not made in the return – Assessment is completed u/s 143(3) – Rejection of Revision application is set aside – Remanded to the Commissioner to consider the claim on merit.[S.80IA. Art. 226]

    Assessment completed u/s 143(3). Subsequently, an application u/s 264 filed before the Pr. CIT for the bonafide error in not claiming the deduction u/s 80-IA in the return of income nor in the assessment proceedings, the Pr. CIT denied. On writ, the petitioner submitted that the relevant assessment year being the first year of business operation, the assessee is entitled to the beneficial provision for deduction u/s 80-IA.Allowing the petition, the Court held that there is no limitation on power of Pr. Chief CIT or Chief CIT or Pr. CIT or CIT while invoking jurisdiction u/s 264 of the Act nor confined to legality or validity of assessment order or a claim made and disallowed or a claim not put forth by the assessee and accordingly, set aside with a direction to the Pr. CIT. Followed Geekay Security Services (P.) Ltd. v. Dy. CIT (2019) 101 taxmann.com 192 / 261 Taxman 152 (Bom) (HC), Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC) distinguished (AY. 2014-15)Tata-AldesaJV v. UOI (2024) 159 taxmann.com 534 / 460 ITR 302 (Telangana) (HC)

91. S. 271(1)(c) : Penalty – Mistake while uploading the return – no intention of furnishing any inaccurate particulars or concealment of income

    Assessee to conceal the income or furnish inaccurate particulars of income. It has also accepted the explanation that the CFO was entrusted with the filing of return and the CFO made a mistake in not properly uploading the return by filling up the return with the disallowances which were already reported by the auditors in the tax audit report. a mistake while uploading the return of income in the given facts and circumstances of the case.Commissioner of Income Tax-13 v. Pinstorm Technologies Pvt Ltd. ITXA NO. 1117 OF 2018, Dated: 20/12/2023, AY 2010-11 (Bom) (HC).

92. S. 271(1)(c) : Penalty – Concealment – Ground raised first time before High Court – After 23 years – Defects in the Notice – Principle of natural justice cannot be raised after 23 years – Assessee participated wholeheartedly in the penalty proceedings, however, later on before the High Court raised the objection in regard to the defect in notice – The assessee had understood the contents of the notice as to which two limbs falling u/s 271(1)(c) and complied with the SCN without raising any objection – Assessee not permitted to raise the question of fact before the Court – Hence, the Revenue’s appeal allowed. [S.260A, 274, Art. 226]

    Income assessed u/s 143(3). The original assessment was set aside by the CIT (Appeals). The order to that effect passed by the AO at the income assessed denying the claim of brought forward unabsorbed losses of the earlier years. Based on such assessment, the AO initiated the penalty u/s 271(1)(c). In the meantime, the CIT (Appeals) deleted the additions. The department filed the second appeal before the Tribunal. ITAT set aside and restored the order of the AO, thereby allowing the department’s appeal.Order u/s 271(1)(c) passed. The appeal before the CIT (Appeals) has been allowed. The department filed the second appeal before the Tribunal, decided in favour of the department. Before the Court, for the first time, the assessee raised the issue of defective notice as to the limbs of section 271(1)(c). The Court held that it is not a e question of law but a question of fact, at no point of time, the assessee had a grievance to the notice being in any manner vague, ambiguous and not being understood by the assessee in regard to the limbs u/s 271(1) (c). The judgment in Ventura Textiles Ltd. v. CIT (2020) 117 taxmann.com 182 / 274 Taxman 144 / 426 ITR 478 (Bom) distinguished. Referred, Mohd.A Farhan A. Shaik v. Dy.CIT (2021) 434 ITR 1 (Bom) (HC)(FB) (AY. 1984-85) Veena Estate (P.) Ltd. v. CIT (2024) 158 taxmann. com 341 / 461 ITR 483 (Bom)(HC)

93. S. 271C: Penalty – Failure to deduct tax at source – AO issued penalty 11 years after assessment order passed – Held, imposing penalty barred by limitation.

    Suo moto disallowance sought by the assesee with regard to the provisions of section 40(a)(ia) of the Act. The AO passed assessment order. The JC submitted a proposal for levying penalty for failure to deduct tax at source. The AO issued a notice almost 11 years after the assessment order and 14 years after the return was filed. On appeal, the Hon’ble Delhi High Court observed that the word used in the provision of section 275(1)(c) is ‘initiated’, which is an act which would get triggered on the date when the proposal is made. This rationale ties in with the view taken by the coordinate Bench of the High Court in the case of Clix Capital Services (P.) Ltd. [2023] 149 taxmann.com 279 (Delhi) (HC). Hence, it was held that the action of the revenue is barred by limitation.(AY. 2005-06)PCIT (TDS)-1 v. Hindustan CocaCola Beverages (P.) Ltd. [2023] 157 taxmann.com 587 (Delhi)

94. S. 271(1)(c): Penalty – Concealment – Annual letting value- Debatable issue – Not specifying the charge – Order of Tribunal deleting the penalty is affirmed. [S. 22, 23, 274]

    Dismissing the appeal of the Revenue the Court held that the penalty notice did not indicate which of the two limbs of S. 271(1) (c), i.e., concealment of income or furnishing of inaccurate particulars of income, was triggered in assessee’s case. The other issue which was ruled in favour of the assessee in prior years and reversal of trend happened only when in the High Court ruled differently. Held, it was a debatable issue and no penalty could be levied. Order of Tribunal is affirmed. (AY. 2011-12)PCIT v. Ansal Properties & Infrastructure Ltd (2024) 296 Taxman 470 (Delhi)(HC)

95. S. 271(1)(C) : Penalty – Concealment – Not specifying the charge – Order of Tribunal deleting the penalty is affirmed. [S. 260A]

    AO passed penalty order under section S. 271(1) (C) for furnishing inaccurate particulars of income or concealment of income. The Hon’ble Tribunal deleted the penalty holding that there was non-application of mind as the order did not tick the relevant clause of ‘concealment of income’ or ‘furnishing of inaccurate particulars of income’. The Hon’ble Delhi High Court observed that the penalty order, as a matter of fact, injects greater confusion in this behalf and that there was obviously no clarity in the mind of the Assessing Officer as to which limb of section 271(1)(c) got attracted in the instant case for initiation, followed by imposition of penalty. Hence, the decision of the tribunal was upheld. (AY. 2003-04)PCIT v. Modi Rubber Ltd. [2023] 157 taxmann.com 588 /(2024) 296 Taxman 381 (Delhi) (HC)

96. S. 271(1)(c): Penalty – Concealment – Not specifying the specific charge – Reason for levying penalty unclear – Order of Tribunal deleting the penalty is affirmed. [S. 260A, 274]

    Appeal filed by revenue against common order of the Hon’ble Tribunal deleting penalty as it was unclear that a penalty on the respondent/ assessee is levied for concealment of particulars of his income or furnishing inaccurate particulars. The Hon’ble held that this issue is covered in a catena of judgments, therefore, the Tribunal was justified in quashing the penalty proceedings. (AY. 2008-09, 2009-10, 2010-11, 2011-12)PCIT (Central-3) v. Shyam Sunder Jindal [2023] 156 taxmann.com 625/(2024) 296 Taxman 115 (Delhi) (HC)

97. S. 271(1)(c) Penalty – Concealment – Not specifying the charge – Satisfaction is sine qua non for initiation of proceeding and penalty proceedings – Order of Tribunal affirming the penalty is set aside.[S. 260A, 274]

    The assessee filed its return of income for the AY 2014-15. The assessee had issued equity shares at premium. The assessing officer made addition to the total income of the assessee on the ground that the aggregate consideration for shares exceeded the fair market value. A notice under section 274 read with section 271(1) (c) was issued to the assessee on ground that assessee had ‘furnished inaccurate particulars of income.’, whereas the assessment order mentioned that the penalty should be imposed as it had ‘concealed particulars of its income’.Upon appeal to the High Court, it was held that the assessment order passed, and the penalty levied was on the ground that assessee has ‘concealed particulars of its income’ whereas the ground on which the notice under section 274 was issued on account of ‘have furnished inaccurate particulars of income’, without striking off the former ground in the notice. For initiation of penalty proceeding under section 271(1)(c) the satisfaction recorded should be on an existing ground on which the notice is issued. In this case the satisfaction recorded in the assessment order is regarding concealment of income, thereby the penalty order was not sustainable in law.(AY. 2014-15)Kshema Geo Holdings (P.) Ltd. v. ITO (2024) 460 ITR 203 (Karn)(HC)

98. S. 276CC: Offence and prosecution – Failure to furnish return of income – Assessment order and penalty order is set aside – The criminal proceedings pending against the assessee were liable to be quashed. [S.132, 139, 153A 271F, 276(2), 27C(1), Code of Criminal Procedure 1973, S 190(1)(1), 200]

    In the course of search, certain incriminating documents were found and seized. The return of income was filed and the assessment with certain additions were completed u/s 153A and accordingly demand of tax, interest, etc. was raised. The Revenue simultaneously initiated the prosecution u/s 200 and 190(1)(1) of Cr.PC for the offense u/s 276C(2) r.w.s. 153A and also initiated the prosecution for the offences u/s 276CC. The Court found that the entire prosecution initiated is in pursuance to the order of assessment and penalty u/s 143(3) r.w.s. 153A and when the order of assessment itself is set aside, the initiation of prosecution cannot be sustained till the fresh assessment order passed. The complaints quashed. (AY. 2009-10 to 2015- 16) (SJ)S. Arputharaj v. DCIT (2023) 156 taxmann.com 572 / (2024) 296 Taxman 291 / 461 ITR 450 (Mad)(HC)

99. S. 276CC: Offence and prosecution – Failure to furnish return of income – Penalty deleted – There was no penalty or assessment because of subsequent orders passed by the competent authority, entire criminal proceedings against assessee were to be quashed. [S. 139, 279]

    The AO issued a show-cause notice u/s. 276CC for initiation of prosecution proceedings for non-filing of return of income in time. The assessee took a plea that since the office of the Director General had not given him a copy of the documents seized during the search and seizure operation in his business premises, he was unable to furnish the return. However, the authorized representative had already collected the original and photocopy of the documents seized but still, the petitioner had not filed returns of income. The Commissioner gave his opinion that the assessee had failed to comply with the notices of the Assessing Officer without assigning any reasons and had also failed to file the return of income and, thus, there was a wilful omission on the part of the assessee in filing returns of his income and, as such, accorded sanction u/s. 279 for launching prosecution u/s. 276CC for not filing returns of income without giving any reasonable cause and non-compliance with the notices of the AO.The High Court held that as the Assessee submitted for the block assessment period, the refund was found to be due to the assessee and refunds were already adjusted against the outstanding demand of the assessee. When there was no demand, filing of prosecution itself was bad in law and to allow to continue proceeding would amount to abuse of the process of law, hence, not justified. Where there was no penalty or assessment against the assessee, orders passed by the competent authority, entire criminal proceedings against the assessee were to be quashed.Gunwant Singh Saluja v. State of Jharkhand (2024) 296 Taxman 302 (Jharkhand)(HC)

100. S. 276CC: Offences and prosecutions – Failure to furnish return of income – Tax payable reduced by advance tax paid and tax deducted at source did not exceed Rs. 3,000, initiation of prosecution under section 276CC was not sustainable and liable to be quashed. [S.139]

     Court held that as per proviso (ii)(b) to section 276CC if tax payable determined by regular assessment has reduced by advance tax paid and tax deducted at source does not exceed Rs. 3,000, such an assessee shall not be prosecuted for not furnishing return under section 139(1) of the Act. Court held that since petitioner had paid advance tax, TDS, TCS, self-assessment tax, and tax payable by him did not exceed a sum of Rs. 3,000, initiation of prosecution under section 276CC was not sustainable and liable to be quashed.(AY. 2013-14)Manav Menon v. Dy. CIT (2024) 296 Taxman 275 (Mad(HC)Black Money (Undisclosed Foreign Income And Assets) And Imposition Of Tax Act, 2015

101. S. 50: Punishment for failure to furnish in return of income, any information about an asset (including financial interest in any entity) located outside India – Appearance of petitioner is dispensed with certain conditions. [Criminal Procedure Code, 1973, S. 205]

     Search and seizure revealed two bank accounts in Hong Kong of the assesee and her husband that were disclosed in the assessment years. Charge of section 50 of the black money act on the assessee was framed. Assessee filed application u/s 205 of Cr.P.C before trial court for exempting her from attending trial. Trial court rejected the application. The Calcutta High Court observed that from the impugned order it is found that the learned Magistrate has not considered whether any useful purpose could be served by requiring the personal attendance of the accused or whether the progress of the trial is likely to be hampered on account of her absence. Since the nature of complaint precisely is based on documents, I am of the opinion that personal appearance of the petitioner may be dispensed with subject to certain conditions as follows:-

     1. That the accused petitioner shall submit a written undertaking before the learned Trial Court that she will not challenge her identity and the trial will proceed in her absence but in presence of her advocate- on-record.
     2. The accused-petitioner shall also give written undertaking before the learned Trial Court that she will appear as and when required by the learned Court.
     3. The petitioner shall not leave the country without the prior permission of the learned trial Court. Hence, the application was allowed. (AY. 2012-13, 2014-15)

     Prerna Chopra v. UOI. (2023) 155 taxmann.com 430/ (2024) 296 Taxman 269 /460 ITR 664 (Cal) (HC) Direct Tax Vivad Se Vishwas Act, 2020

102. S. 2(1) : Disputed tax – Rectification – As per clarification issued by CBDT if there was a reduction or increase in income and tax liability of assessee as a result of rectification, disputed tax would be calculated after giving effect to rectification order passed – Revised form 3 is held to be not justified. [S. 2(1)(j), IT Act, 154, Art. 226]

     Allowing the petition the Hon’ble Court has held that in DTVSV Act, 2020, if there was a reduction or increase in income and tax liability of assessee as a result of rectification, disputed tax would be calculated after giving effect to said rectification order passed. Issuance of revised form is held to be not sustainable. The rejection order is quashed. Respondents are directed to act in furtherance of the petitioner’s declaration by way of form 3 dated January 18, 2021 in accordance with the clarification of the Act. (AY. 2014-15)Rajpal Lakhmichand Arya v. PCIT (2024) 461 ITR 79 (Bom)(HC)

103. S. 2(1) : Disputed tax – Matter remanded by the Tribunal to the Assessing Officer – Bogus purchases – Tax to be computed on the element of Gross Profit in respect of addition made for bogus purchases and not entire purchases added by the AO in original assessment.[S. 2(1)(j)(B), 3, ITAct, S. 68. Art. 226]

     The AO made addition for bogus purchases u/s. 68 of the Act for A.Y. 2011-12. The CIT(A) restricted the addition to 25%. Hence, both Revenue and the assessee filed appeals before the Tribunal which was disposed by order dated 26.09.2019 wherein it held that entire addition cannot be made but it should be restricted to the difference between GP on genuine purchases and GP on bogus purchases. For want of details, Tribunal restored the matter to the AO. Both Revenue and the assessee filed further appeals before High Court on 31.02.2021. The assessee filed Form 1 under VVS showing tax liability of Rs.40,58,100 but certificate was issued for Rs. 1,62,32,404/- by relying on Q.no.7 of Circular 9 of 2020 dated 22.04.2020.(2020) 422 ITR 131(St) Hence, the assessee filed Writ which was disposed holding that the reliance placed by the Revenue on said Circular was unstainable. Accordingly, the Revenue was directed to compute disputed tax demand by giving effect to the order passed by Tribunal and issue Form 3 within 3 months from date of the order. Agarwal Industrial Corporations Ltd. v. UOI [2023 455 ITR 404 (Bom)(HC)] (AY. 2011-12)Agarwal Industrial Corporations Ltd. v UOI (2024) 461 ITR 74 (Bom)(HC)

104. S.3: Payment of tax – Condonation of delay – delay of three days in depositing arrears of tax deserves to be condoned. [S. 5, Art. 226]

     For the delay of three days, the Competent Authority did not accept the amount of tax deposited by the assessee and he was not permitted to file Form IV to entirely avail the benefit of the scheme. The Chairman of CBDT also rejected the application for condonation of delay of three days in depositing arrears of tax. The High Court Held that, legal principles laid down by Courts on the subject, delay of three days in depositing arrears of tax deserved to be condoned. (Followed Shekhar Resorts Ltd. v. UOI [2023] 146 taxmann.com 121 (SC)) of the Direct Tax Vivad Se Vishwas Act, 2020)Digvendra Pratap Singh v. UOI (2024) 296 Taxman 460 (All)(HC)