1. S.2(22)(e) : Deemed dividend – Inter-corporate
    transactions – Loans given by companies to each other in course of inter se
    business transactions could not be regarded as deemed dividend

    Allowing the appeal of the assessee the Tribunal held tha assessee is major shareholder in three companies, loans given by those companies to each other in the course of inter se business transactions could not be regarded as deemed dividend in the hands of the assessee.
    (AY. 2009-10)

    Chandrasekhar Maruti v. ACIT (2016) 159 ITD 822/ ( 2017) 183 TTJ 459 (Mum.)(Trib.)

  2. S.9(1)(i) : Income deemed to accrue or arise in India – Business income – Consideration received for licensing of software programmes on the facts of the case cannot be assessed as “royalty” it is to be assessed as business income –DTAA – India – Netherland [Ss. 9(1)(vi), 90(2), Art., 712]

    On appeal by the assessee to the Tribunal HELD allowing the appeal:

    (i) A parallel to practical, every day examples would be useful. Take, for instance, the example of when one buys a book from amazon for their Kindle device. In this case, amazon can transfer the intellectual property of the book to multiple other users simultaneously, but each single transaction would still be a sale. This would also be true of the example of a music CD. The CD is the ‘medium’ by which the intellectual property, viz. the songs, passes to the buyer. The manufacturer can sell it to an end-user or to an intermediate retailer. The same song can be put on countless CDs. This too is a sale. When one buys a car, one buys the technology that is contained in the body of the car; the body is just the medium. On ITunes, when one buys a song, the song is transferred into a format which is accessible to the buyer, a proprietary format that needs a special device or software. Yet it is a sale. Limitless ITunes users can buy the song simultaneously. This is a sale to each of them. In the case of CD containing software, say for example Microsoft Word, the medium would again be the CD holding the intellectual property, which would be the software technology. This would also be a sale, despite the fact that this same software technology could be put on unlimited number of CDs and sold to multiple users simultaneously. Effective control of that particular software on that one CD is passed to the buyer. The buyer could use it, alienate it, destroy it, and do anything at all that he likes with it. If he made illicit copies of it, this would constitute infringement; and that in itself would not make the transfer of the software on a CD a service. Even if the buyer transferred this non-transferable software, it would amount to a breach of contract provided in the CD package, just as it would under Monsanto India’s sub-licensing agreement. However, this does not do anything to disqualify the transaction itself from being a sale. These are all sales.

    (ii) A perusal of the provisions of the Copyright Act reveals that the computer software is included in the definition of literary work and is covered under the purview and scope of copyright. The exclusive rights to do or authorise the doing of certain acts as mentioned in clause (a) and clause (b) of section 14 vests in the owner of the work such as to reproduce the work, to issue copies, to make translation or adaptation, to sell or give on commercial rental in respect of a work. The internal use of the work for the purpose it has been purchased does not constitute right to use the copyright in work. Our above also finds support from certain other provisions of the Copyright Act.

    (iii) In absence of transfer of rights to authorise doing of certain acts as mentioned in sections 2, 13 & 14 of the Copyright Act it cannot be said that there was transfer of copyright. Therefore, in view of these judgments payment on sale of software shall not fall within the definition of ‘Royalty’, as per DTAA.

    (iv) If we analyse and compare various provisions of the Copyright Act with the relevant clauses of the master agreement, it is noted that the said agreement does not permit HLL to carry out any alteration or conversion of any nature, so as to fall within the definition of ‘adaptation’ as defined in Copyright Act, 1957. The right given to the customer for reproduction was only for the limited purpose so as to make it usable for all the offices of HLL in India and no right was given to HLL for commercial exploitation of the same. It is also noted that the terms of the agreement do not allow or authorise HLL to do any of the acts covered by the definition of ‘copyright’. Under these circumstances, the payment made by HLL cannot be construed as payment made towards ‘use’ of copyright particularly when the provisions of Indian Income-tax Act and DTAA are read together with the provisions of the Copyright Act, 1957.

    (iv) It was also argued by the Revenue that provisions of section 9(1)(vi) should be applied, and if these are so applied, then the sale of software shall be covered under Explanation 4 to section 9(1)(vi), and, therefore, the same should be brought to tax as such. In this regard also, it is noticed by us that no corresponding amendment has been made in the provisions of the DTAA. Under these circumstances, the assessee would be entitled to the provisions, which are more beneficial to the assessee out of the provisions of Indian Income-tax Act and DTAA between India and the Netherlands, in view of provisions contained in section 90(2) of the Act. We have already held that as per the provisions of India-Netherlands DTAA, the amount received by the assessee on account of sale of software would not fall within the definition of ‘Royalty’ as provided in Article 12(4) of the DTAA. Under these circumstances, it will not be legally permissible for us to refer to the provisions of the Act to decide the taxability of this amount in the hands of the assessee in India. Thus, in our considered view, based upon the facts and circumstances of the case and legal position as discussed above, the impugned amount received by the assessee is in the nature of business profits assessable under Article 7 of India-Netherlands DTAA and would not be taxable as ‘Royalty’ under Article 12 of the DTAA. (I.T.A. Nos. 83 & 84/Mum./2007, dt. 21-12-2016)( AY. 1998-99 & 1999-2000)

    Qad Europe B. V. DDIT (Mum.) (Trib.);
    www.itatonline.org

  3. S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – No operations of the business of commission agent is carried on in India – Not liable to deduct tax at source. [S.5(2)9(1)(vii), 195, 201(1), 201(IA)]

    Dismissing the appeal of revenue the Tribunal held that no operations of the business of commission agent is carried on in India, the Explanation 1 to Section 9(1)(i) takes the entire commission income from outside the ambit of deeming fiction under section 9(1)(i), and, in effect, outside the ambit of income ‘deemed to accrue or arise in India’ for the purpose of Section 5(2)(b), the assessee is not liable to deduct tax at source. (ITA Nos. 249/Ahd/2015 and 48/Raj/2015, dt. 3-1-2017)(AY. 2010-11)

    DCIT v. Welspun Corporation Limited (Ahd.)(Trib.) ;
    www.itatonline.org

  4. S.10(38) : Long term capital gains from equities – Penny stocks – Shares – Transactions cannot be held to be bogus [S. 45, 68]

    Dismissing the appeal of revenue, Tribunal held that the fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were sham or bogus. (ITA No. 1442/Ahd/2013 & Co. No. 209/Ahd/2013., dt. 6-1-2017)(AY. 2005-06)

    ACIT v. Vineet Sureshchandra Agarwal (Ahd.)(Trib.);
    www.itatonline.org

  5. S.10(38) : Long-term capital gains from equities – Penny stocks – Shares – Long-term capital gains claimed cannot be treated as bogus unexplained income if the paper work is in order. The fact that the company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assessee is at fault [Ss.45, 68]

    Allowing the appeal of assessee the Tribunal held that, capital gains from penny stocks – Long-term capital gains claimed cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assessee is at fault. CIT vs. Carbo Industrial Holdings Ltd. (2000) 244 ITR 422 (Cal)(HC).( ITA No. 1213/Kol/2016, dt. 11-1-2017)(AY. 2005-06)

    Surya Prakash Toshniwal HUF v. ITO (Kol.)(Trib.);
    www.itatonline.org

  6. S.14A : Disallowance of expenditure – Exempt income – PMS brokerage fee and other incidental expenses for making investment into shares have not been debited in the P & Loss account – No disallowance can be made

    Assessing Officer disallowed the expenses merely following the formula u/s. 14A read wit R. 8D. Assessee contended that the expenses relating to investment was debited to personal account which was deducted from capital hence no disallowance can be made. CIT(A) accepted the submission of assessee and deleted the addition. On appeal by Revenue; dismissing the appeal of revenue the Tribunal held that; PMS brokerage fee and other incidental expenses for making investment in to shares have not been debited in the P & Loss account, hence no disallowance can be made. (ITA No. 3217/Mum/2014 & ITA No. 1411/Mum/2015, dt. 25-1-2017) (AY. 2010-11, 2011-12)

    ACIT v. Sachin R. Tendulkar ( Mum)(Trib);
    www.itatonline.org

  7. S. 14A : Disallowance of expenditure – Exempt income –No disallowance can be made where no exempt income has been earned by assessee during year [R. 8D]

    Dismissing the appeal of the revenue , the Tribunal held that, No disallowance can be made where no exempt income has been earned by assessee during year. (AY. 2011-12)

    ACIT v. Pardeep Kumar Aggarwal (2016) 159 ITD 54 (Chd.)(Trib.)

  8. S.14A : Disallowance of expenditure – Exempt income –Disallowance cannot be made in respect of shares held as stock-in-trade. [R.8D]

    Allowing the appeal of the assessee, Tribunal held that disallowance cannot be made in respect of shares held as stock-in-trade. (AY 2009-10)

    Fiduciary Shares & Stock (P.) Ltd. v. ACIT (2016) 159 ITD 554/ 181 TTJ 750 (Mum)(Trib.)

  9. S.28(i) : Business income – Interest – When memorandum and articles of association permits the assessee to lend money and also to receive the money on interest the said interest income is assessable as business income [S. 56]

    The Tribunal held that memorandum and articles of association permits the assesse to lend money and also to receive the money on interest. Therefore, interest income constituted business income of the assessee. (AY. 2010-11)

    ACIT v. Rama Panels P. Ltd. (2016) 181 TTJ 698 (Jab.)(Trib.)

  10. S.28(i) : Business loss – The loss on sale of shares of a wholly – owned subsidiary is allowable as a business loss if the investment in the subsidiary was made for commercial purposes. [S.37(1)]

    Allowing the appeal , the Tribunal held that ; The loss on sale of shares of a wholly-owned subsidiary is allowable as a business loss if the investment in the subsidiary was made for commercial purposes. (ITA No. 223/Coch/2015 and 189/Coch/2016, dt. 10-1-2017) (AY. 2010-2011 and 2011-12)

    Apollo Tyres ltd. v. ACIT (Cochin)(Trib) ;
    www.itatonline.org

  11. S.28(1) : Business loss – Foreign exchange forward contracts – Hedging loss was held to be allowable as business loss [S.43(5)]

    Tribunal held that ; Assessee engaged in manufacture and export of processed food products, in order to safeguard itself against fluctuations in exchange rates of foreign currency, entered into foreign exchange forward contracts with banks against confirmed export order, hedging loss suffered by assessee in respect of said forward contracts was to be allowed as business loss. (AY. 2010 – 2011)

    Foods and Inns Ltd. v. ACIT (2016) 159 ITD 1007 (Mum)(Trib.)

  12. S.32 : Depreciation – Leasehold rights on land do not fall in category of intangible asset as defined u/s. 32(1)(ii), hence do not qualify for allowance of depreciation. [S. 32(1)(ii)]

    Tribunal held that ; the leasehold rights on land do not fall in category of intangible asset as defined u/s 32(1)(ii). By virtue of lease only an interest in land is created which does not qualify for allowance of depreciation. (AY. 2008-09)

    Cyber Park Development & Construction Ltd. v. Dy. CIT (2016) 159 ITD 648 / 181 TTJ 556 (Bang.)(Trib.)

  13. S.37(1) : Business expenditure –Penalty – Compounding fee paid by assessee as per direction of RBI for some technical violations without committing any offence is an allowable business expenditure [Foreign Exchange Management Act, 1999, S. 131]

    Allowing the appeal of the assessee, the Tribunal held that since compounding fee was not in nature of penalty but compensatory in nature, assessee was eligible for deduction u/s. 37(1). Since said fee had not been paid for contravention of provisions of law, Explanation to s. 37(1) was not attracted. (AY. 2009-10)

    EON Hadapsar Infrastructure (P.) Ltd. v. ACIT (2016) 159 ITD 532 (Pune)(Trib.)

  14. S.40(a)(i) : Amounts not deductible – Deduction at source – Fees for technical services – Subsequent retrospective amendment would not expose payer to an impossible situation of requiring deduction of tax at source on date of payment- Not liable to deduct tax at source- DTAA – India-UK-USA [Ss. 9(1)(vii), 40(a)(1), 195, Art. 14]

    Dismissing the appeal of the revenue the Tribunal held that subsequent retrospective amendment would not expose payer to an impossible situation of requiring deduction of tax at source on date of payment, hence not liable to deduct tax at source. (AY. 2008-09)

    ACIT v. BSR & Company [2016] 159 ITD 1068/ 182 TTJ 544 (Mum.)(Trib.)

  15. S.40(a)(ia) : Amounts not deductible – Deduction at source – Once income is assessed by applying net profit rate disallowances cannot be made, and also income has been shown in the hands of recipient and has suffered tax

    The Tribunal held that once the income is assessed by applying net profit rate, no disallowance under section 40(a)(ia) can be made and the section is not applicable as the impugned amount has been shown in the hands of recipient and has suffered tax. (AY. 2011-12)

    ACIT v. J. S. Grover Constructions (2016) 181 TTJ 23(UO) (Asr.) (Trib.)

  16. S.40(b) : Amounts not deductible – Quantification of remuneration to partners was specified hence no disallowance can be made

    The Tribunal held that the manner of quantification of remuneration is clearly specified in the partnership deed and therefore, remuneration paid to the partners is allowable and disallowance under section 40(b) cannot be sustained. (AY. 2010-11)

    ACIT v. Modern Motors (2016) 181 TTJ 813 (Jaipur)(Trib.)

  17. S.41(1) : Remission or cessation of trading liability – Best judgment assessment – Where the books of account is rejected and net profit is assessed, there cannot be separate addition in respect of creditors appear in such books on the basis that they ceased to exist [S. 144]

    Dismissing the appeal of the Revenue, the Tribunal held that when an assessment was completed u/s.144 applying net profit rate on turnover, addition u/s. 41(1) could not be made when books of account as such were rejected question whether creditors appearing in such books were there or ceased to exist, would become irrelevant. (AY. 2008-09)

    Dy. CIT v. JSR Constructions (P.) Ltd. (2016) 159 ITD 749 (Bang.)(Trib.)

  18. S.45 : Capital gains – Long term or short term – Letter of allotment – for considering whether an asset is a “long-term capital asset”, the period of holding must be computed on a de facto basis. The letter of allotment, even though not “ownership”, must be taken as the date of holding the asset.  [Ss. 2(14), 2(29A), 2(42A) 2(47), 54, 54F]

    Allowing the appeal of the assessee the Tribunal held that, S. 2(42A) uses the term “held”, the other provisions use the terms “acquired”, “purchased” and “owner”. Accordingly, for considering whether an asset is a “long-term capital asset”, the period of holding must be computed on a de facto basis. The letter of allotment, even though not “ownership”, must be taken as the date of holding the asset. (ITA No. 2291/Mum/2015, dt. 13-2-2017)(AY. 2011-12 )

    Anita D. Kanjani v. ACIT (Mum.)(Trib.);
    www.itatonline.org

  19. S.45 : Capital Gains – Penny Stocks – The fact that the stock is thinly traded and there is unusually high gain is not sufficient to treat the long-term capital gains as bogus when all the paper work is in order. The revenue has to bring material on record to support its finding that there has been collusion / connivance between the broker and the assessee for the introduction of its unaccounted money [Ss. 48, 68]

    Allowing the appeal of assessee the Tribunal held that the fact that the stock is thinly traded and there is unusually high gain is not sufficient to treat the long-term capital gains as bogus when all the paper work is in order. The revenue has to bring material on record to support its finding that there has been collusion / connivance between the broker and the assessee for the introduction of its unaccounted money. On facts the assessee has produced all relevant documents as per the law. (ITA No. 19/Kol/2014, dt. 2-12-2016)(AY. 2005-06)

    Dolarri Hemani v. ITO (Kol.)(Trib.);
    www.itatonline.org

  20. S.45 : Capital Gains – Business income – Portfolio Management Scheme (PMS) – Gains assessable as capital gains and not as business income [Ss.28(i), 48]

    Dismissing the appeal of the revenue, the Tribunal held that; share held in portfolio Management Scheme (PMS) cannot be assessed as business income, it has rightly assessed as capital gains. CBDT Circular No. 4/7 dated 15-6-2007 and Circular No. 6 of 2016 dated 29-2-2016 considered and entire law on the subject is explained. (ITA No. 3217/Mum/2014 & ITA No. 1411/Mum/2015, dt. 25-1-2017) (AYs. 2010-11, 2011-12)

    ACIT v. Sachin R. Tendulkar (Mum.)(Trib.) ;
    www.itatonline.org

  21. S.45(4) : Capital Gains – Distribution of capital asset – Retirement – Amount received is not chargeable to tax [S. 45]

    Amount received by assessee on retirement as partner from firm, on account of credit balance standing in capital account and current account, and not for relinquishing or extinguishing his rights over any assets of firm, would not be chargeable under section 45(4) as capital gains. (AY. 2009-10)

    Sharadha Terry Products Ltd. v. ACIT (2016) 180 TTJ 284 (Chennai)(Trib.)

  22. S.50C : Capital gains – Full value of consideration – Stamp valuation – Where assessee has transferred only rights in impugned land which cannot be equated to land or building or both, provisions cannot be applicable [S.50C]

    Allowing the appeal of the assessee the Tribunal held that on facts assessee had transferred only rights in impugned land which could not be equated to land or building or both and, therefore, provisions of section 50C could not be applied. (AY. 2006-07)

    Devindraben I. Barot (Smt.) v. ITO (2016)159 ITD 162/ 182 TTJ 805 (Ahd.)(Trib.)

  23. S.69C : Unexplained expenditure – Bogus Purchases – Purchases cannot be treated as bogus merely on the basis of the statements and affidavits filed by the alleged vendors before the Sales-tax department – Additions cannot be made without giving an opportunity of cross examination [S.133(6)]

    Dismissing the appeal of Revenue, the Court held that ; purchases cannot be treated as bogus merely on the basis of the statements and affidavits filed by the alleged vendors before the Sales-tax department. The said statements cannot be relied upon without cross-examination of the parties. The fact that the parties did not respond to the s. 133(6) notices is not relevant if the assessee filed copies of purchase invoices, extracts of stock ledger showing entry/exit of materials, copies of bank statements to evidence that payments for these purchases were made through normal banking channels, etc. to establish genuineness of the aforesaid purchases. Addition cannot be made u/s. 69C of the Act. ( ITA No. 5194/Mum/2014, dt. 31-1-2017) (AY. 2010-11)

    ACIT v. Mahesh K. Shah (Mum.)(Trib.);
    www.itatonline.org

  24. S.73 : Losses – Shares – Principal business is trading of
    shares, loss incurred in share trading will not be treated as speculation
    business loss – Amendment inserted in Explanation to S. 73 by Finance (No. 2)
    Act, 2014 w.e.f. 1-4-2015 is clarificatory in nature. Allowing the appeal of the
    assessee , the Tribunal held that; if principal business is trading of shares,
    loss incurred in share trading will not be treated as speculation business loss
    – Amendment inserted in Explanation to S. 73 by Finance (No. 2) Act, 2014 w.e.f.
    1-4-2015 is clarificatory in nature and would therefore operate retrospectively
    from 1-4-1977 from which date Explanation to S. 73 was placed on statute. (AY.
    2009-10)

    Fiduciary Shares & Stock (P.) Ltd. v. ACIT (2016) 159 ITD 554) / 181 TTJ 750 (Mum)(Trib)

  25. S.73 : Losses in speculation business – If the assessee manages his transactions of sale and purchase of shares in cash segment and in future segment as a composite business, the transactions cannot be segregated to arrive at profit or loss in each segment separately. The provisions of the Income-tax Act cannot be interpreted to the disadvantage of the assessee and to segregate the transactions in cash and future segment which will be against the spirit of the taxation law

    Dismissing the appeal of the revenue ; the Tribunal held that the peculiarity of the business of the assessee is such that the transactions carried out by the assessee in cash segment and in future segment cannot be segregated. The business of the assessee survives on the ultimate resultant figure arrived at after setting off/adjusting of the profit and loss from each segment. It cannot be said that the transactions in each segment done by the assessee are independent of each other. Before parting we would like to further add that certain exceptions have been carved out under section 43(5) vide which certain transactions in derivative named as ‘eligible transactions,’ done on a recognised stock exchange, subject to fulfilment of certain requirements, are deemed to be non-speculative. The said provisions have been inserted in the Act for the benefit of the assessees keeping in view the fact that in such type transactions on recognised stock exchange, the chance of manipulating and thereby adjusting the business profits towards speculative losses by the assessee is negligible because such transactions are done on recognised stock exchange and there are less chances of manipulation of figures of profits and losses. These provisions have been inserted for the benefit of the assessee so that the assessee may be able to set off and adjust his profit and losses from derivatives in commodities against the normal business losses. These provisions are intended to ease out the assessee from the difficulties faced due to the stringent provisions separating the speculative transactions from the normal transactions. However, these exclusions given to the assessee cannot be allowed to be so interpreted to the disadvantage of an assessee so as to give it a different meaning and thereby denying the assessee the set off of otherwise eligible business loss from one segment as against the other segment, especially when the activity done by the assessee is a composite activity and profit and loss in one segment not only depends but the very transaction is done taking into consideration not ‘expected’ but certain future profit or loss in other segment.(ITA No. 3654 & 3660/M/2014, dt. 28-12-2016)(AY. 2009-10)

    J. M. Financial Service Ltd. v. JCIT (Mum.)(Trib.);
    www.itatonline.org

  26. S.92C : Transfer pricing – Arm’s length price – International loan transaction in hard currency – Interest rate on rupee transactions in India would not be relevant

    Where ALP of an international loan transaction, which was designated in hard currency, is to be ascertained, interest rate on rupee transactions in India is not relevant. (AY. 2008-09)

    Advanta India Ltd. v. ACIT (2016) 137 DTR 233 / 179 TTJ 50 (Bang.)(Trib.)

  27. S.143(2) : Assessment – Notice – Proper service of the notice u/s. 143(2) is mandatory and its failure renders the assessment order void. The fact that an unauthorised person appeared on behalf of the assessee before the AO does not mean that the notice was properly served. [S. 143(3)]

    Allowing the appeal the Tribunal held that proper service of the notice u/s. 143(2) is mandatory and its failure renders the assessment order void. The fact that an unauthorised person appeared on behalf of the assessee before the AO does not mean that the notice was properly served. ( ITA Nos. 181 & 426/Kol./2013, dt. 30-11-2016)(AY. 2008-09)

    DCIT v. M. K. Enterprise (Kol.)(Trib.);
    www.itatonline.org

  28. S.206AA : Requirement to furnish Permanent Account Number – Section does not have an overriding effect over the other provisions of the Act. Consequently, the payer cannot be held liable to deduct tax at higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in spite of their failure to furnish the PAN [S.90(2)]

    Special Bench was constituted to decide the following questions involved .

    “Whether on the facts and circumstances of the case, provisions of section 206AA, of the Act will have a overriding effect for all other provisions of the Act, and that being the case, assessee is required to deduct tax at the rate prescribed therein in case of persons having taxable income in India, including non-residents, who do not furnish their Permanent Account Number”

    Special Bench held that section does not have an overriding effect over the other provisions of the Act. By virtue of s. 90(2), the provisions of the Treaty override s. 206AA to the extent they are beneficial to the assessee. Consequently, the payer cannot be held liable to deduct tax at higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in spite of their failure to furnish the PAN. (ITA Nos. 1187 & 1188/H/2014, dt. 13-2-2017)(AYs. 2011-12 & 2012-13)

    Nagarijuna Fertilizers and Chemicals limited v. ACIT (Hyd.)(Trib.)(SB);
    www.itatonline.org

  29. S.234C : Interest – Deferment of advance tax – Interest is not leviable if the income was not predictable and the assessee could not have anticipated its receipt e.g., the receipt of a gift

    Allowing the appeal of assessee the Tribunal held that though levy of interest for deferment of advance-tax is mandatory and cause & justification for the deferment are irrelevant, the same is not leviable if the income was not predictable and the assessee could not have anticipated its receipt e.g., the receipt of a gift was on 17-12-2011. (ITA No. 7661/Mum/2013, dt. 13-7-2016)(AY. 2012-13)

    Kumari Kumar Advani v. ACIT (Mum.)(Trib.);
    www.itatonline.org

  30. S.251 : Appeal – Commissioner (Appeals) – Powers – Power of enhancement – [S. 251(2)]

    Assessment was completed by adding agricultural income. In appeal the CIT(A) further directed AO to tax capital gains in respect of income earn by assessee on sale of land at Gurgaon. AO directed to compute commission earned by assessee in respect of both sale as well as purchase of agricultural land carried out during year. The Tribunal held that the CIT(A) acted beyond its power by directing AO to tax capital gains in respect of sale of land at Gurgaon, though, there was no addition made by AO in assessment order to that respect. Capital Gains was independent and different source of income and was not subject matter of appeal. In Shapoorji Pallonji Mistry v. CIT, Bombay High Court had held that CIT(A) was not empowered to enhance income on an issue which was not subject matter of assessment Delhi High Court in case of CIT v . Sardari Lal & Co. held that CIT(A) could not touch upon an issue that did not arise from order of the assessment and was outside the scope of the order of the assessment. The order of CIT(A) does not sustain. Assessee appeal allowed accordingly. (AY. 2009-10)

    Bikram Singh v. Dy. CIT (2016) 48 ITR 689 (Delhi)(Trib.)

  31. S. 271(1)(c) : Penalty – Concealment – The non-specification in the notice as to whether penalty is proposed for concealment or for furnishing of inaccurate particulars reflects non-application of mind and renders it void. The fact that the assessee participated in the penalty proceedings does not render the penalty as valid [Ss. 274, 292B, 292BB]

    Allowing the appeal the Tribunal held that non-specification in the notice as to whether penalty is proposed for concealment or for furnishing of inaccurate particulars reflects non-application of mind and renders it void. The fact that the assessee participated in the penalty proceedings does not render the penalty as valid. (ITA No. 2187 & 1789 /Mum/2014, dt. 21-12-2016)(AY. 2009-10)

    Dr. Sarita Milind Davare v. ACIT (Mum.)(Trib.);
    www.itatonline.org

  32. S.271(1)(c) : Penalty – Concealment – Quantum addition was deleted – Penalty would not survive

    The Appellate Tribunal held that the disallowances made by AO. were deleted by the Appellate Tribunal. Hence, there was no basis to continue with the penalty proceedings.

    ACIT v. Tata Industries Ltd. (2016) 51 ITR 101 (Mum.)(Trib.)

  33. S.271(1)(c) : Penalty – Concealment –Satisfaction – The exercise of power to record satisfaction that the person has concealed its income or furnished inaccurate particulars of income has to be exercised in assessment proceedings itself, CIT(A) in appellate proceedings has no jurisdiction to record satisfaction and levy penalty [Ss. 133A, 251]

    Assessee’s assessment having been completed by the AO who had not recorded any satisfaction for initiating penalty under section 271(1)(c) with regard to the additional income offered by the assessee pursuant to the survey action under section 133A, CIT(A) had no jurisdiction to initiate the penalty proceedings and thereafter also complete the same in respect of the said additional income while disposing of the appeal against levy of penalty under section 271(1)(c) in respect of other additions. (AY. 2003-04).

    Ajit Ramchandra Jadhav v. ACIT (2016) 178 TTJ 204 / 135 DTR 1 (Pune)(Trib.)

  34. S.271(1)(c) : Penalty – Concealment – Search and seizure – Initiation proceedings was held to be bad in law, penalty if any leviable it may be section 271AAA(1) [Ss.132, 271AAA(1)]

    Allowing the appeal of the assessee, the Tribunal held that the assessee during search and seizure proceedings admitted that undisclosed income had been accrued to him along with his three brothers in their individual capacity by way of trading in various commodities and real estate and all such facts got duly corroborated from seized material. Penalty if at all leviable, it should be levied under section 271AAA(1) and not under section 271(1)(c) as had categorically been provided in S. 271AAA(3). Intention of legislature in incorporating provisions contained under section 271AA was to provide general amnesty in search and seizure cases. Case of assessee undisputedly falls under section 271AAA and could not be dealt with u/s. 271(1)(c) by any stretch of imagination even. Very initiation of penalty proceedings against assessee under section 271(1)(c) were vitiated in view of amended provisions of law as additional income was disclosed by assessee on basis of search operation conducted. So initiation of penalty proceedings as well as penalty orders and impugned order passed by CIT(A) were not sustainable in eyes of law, penalty imposed was deleted. (AY. 2008-09)

    Ashwani Kumar Arora v. ACIT (2016) 50 ITR 37 (Delhi)(Trib.)

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