1. S.10(3) : Casual and non–recurring receipts – Sum received as compensation as a result of the settlement arrived at in pursuance of the order of the Supreme Court annulling the auction is neither in the nature of capital receipt nor is the same assessable under section 56. [Ss. 4, 56]

The High Court held that the sum received as compensation as a result of the settlement arrived at in pursuance of the order of the Supreme Court annulling the auction is neither in the nature of capital receipt nor is the same assessable under section 56 following the decision of the Bombay High Court in the case of Cadell Weaving Mill Co. Ltd. 249 ITR 265. (AY 1993-94, 1994-95)

Girish Bansal, Gynendra Bansal v. UOI(2016) 142 DTR 138 / 289 CTR 514 (Delhi)(HC)

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

Dismissing the appeal of the revenue, the Court held that the securities constituted the assessee’s stock-in-trade and the income that arose on account of the purchase and sale of the securities was its business income and was brought to tax as such. Whether the securities yielded any income arising therefrom, such as, dividend or interest, no expenditure was incurred in relation to it. The Appellate Tribunal’s deletion of the addition made on account of disallowance under section 14A was proper. (AYs. 2008-09)

PCIT v. State Bank of Patiala (2017) 391 ITR 218/ 245 Taxman 273/ 293 CTR 35 (P&H)(HC)

  1. S.14A : Disallowance of expenditure – Exempt income – Assessing Officer cannot blindly apply the Rule 8D, without elucidating and explaining why assessee’s voluntary disallowance was unreasonable and unsatisfactory [R. 8D(2)]

Dismissing the appeal of the Revenue the Court held that the Assessing Officer cannot blindly apply the Rule 8D, without elucidating and explaining why assessee’s voluntary disallowance was unreasonable and unsatisfactory. (AY. 2006-07)

PCIT v. U.K. Paints (India) (P.) Ltd. (2017) 244 Taxman 309 (Delhi)(HC)

  1. S.14A : Disallowance of expenditure – Exempt income – No disallowance with respect to exempt income can be made if the securities are held as stock-in-trade. [R. 8D]

Dismissing the appeal of the Revenue, the Court held that the Tribunal found that the assessee does not have any investment and all the shares are held as stock in trade as is evident from the orders of the lower authorities. On those facts the Tribuanl held: “Once, the assessee has kept the shares as stock-in-trade, the rule 8D of the Rules will not apply.”(AY. 2008-09)(G.A.No 1150 of 2015 ITAT No. 52 of 2015 dt. 10-2-2017)

CIT v. G K K Capital Market (P) Limited (Cal)(HC); www.itatonline.org

  1. S.23 : Income from house property – Annual value – Property remained vacant throughout the year annual value will be determined notionally. [S.22, 23(1)(b), 23(1)(c)]

Dismissing the appeal of the assessee , the Court held that the annual value of the properties which are more than one, owned by the assessee and which remained vacant throughout the previous year would not be assessed under Section 23(1)(c ) but under Section 23(1)(a) .The annual value would, therefore, be determined notionally (AYs. 2001-02 to 2007-08)

Susham Singla v. CIT (2017) 244 Taxman 302 (P&H)(HC)

  1. S.23 : Income from house property – Annual value – Let out building annual value is to be estimated [Ss. 22, 23(1)(b)]

Allowing the appeal of the Revenue the Court held that the annual value of the properties which are let out by owners to firm or companies in which they are interested is to be determined by applying the provision of section 23(1)(b). (AY. 1996-97)

CIT v. Dr. K. M. Mehaboob (2017) 244 Taxman 263 (Ker.)(HC)

  1. S.28(i) : Business income – Interest earned on short-term fixed deposits is assessable as “profits and gains of business” and not as “income from other sources” [S.56]

Dismissing the appeal of revenue the Court held that the Tribunal records the fact that the three fixed deposits were for a period of 1 day, 28 days and 90 days respectively. Considering the nature of business of the assessee, the Tribunal, was of the view that the interest earned would be taxable under the head ‘Business income’. In support reliance was placed by the impugned order upon the decision of this Court in CIT v. Indo Swiss Jewels Ltd. & Another (2006) 284 ITR 389 (Bom.)(HC). In the context of the respondent’s business and the period of fixed deposits, the Tribunal holds the interest earned on them is taxable as business income. In fact this Court in almost similar circumstances in Indo Swiss Jewels Ltd. (supra) has held interest earned on short-term deposits on the money kept apart for the purposes of business had to be treated as income earned from business and could not be treated as income from other sources. Considering the short duration in which the amounts were kept in fixed deposit awaiting use in its business operations would necessarily mean income earned on account of business following the ratio of this Court in Indo Swiss Jewels Ltd. (AY. 2011-12)

CIT v. Green Infra Limited (2017) 292 CTR 233/146 DTR 262 (Bom.)(HC)

  1. S.32 : Depreciation – Carry forward deficit of earlier years –Entitle to claim the depreciation and also allowed to set off carry forward deficit of earlier years [S.11]

Dismissing the appeal of the revenue, the Court held that an education trust could claim depreciation on assets acquired for purpose of carrying out charitable activities and also carry forward deficit of earlier years and set it off against income of current year. (AY. 2007-08)

DIT v. Mumbai Education Trust (2017) 244 Taxman 163 (Bom.)(HC)

  1. S.37(1) : Business expenditure –Capital or revenue – Expenditure incurred on replacement of old fittings with new, expenditure creating advantage of enduring nature expenditure which is capital in nature.

Dismissing the appeal the Court held that the finding of the Tribunal revealed that by making such expenditure, the assessee had renovated and refurnished its hotel which enhanced the standard of the hotel and added an advantage of an enduring nature which would be reflected in terms of the higher rental and higher occupancy in the hotel. Therefore, the expenditure could not be covered under the general provisions of expenditure allowable under section 37 of the Income-tax Act, 1961. (AY. 1995-96)

U.P. Hotels Ltd. v. CIT (2017) 391 ITR 203 (All.)(HC)

  1. S.37(1) : Business expenditure – Loss – “Setting up of business” and “commencement of business”. All expenditure after “setting up” is deductible business expenditure even if the business has not commenced. A business is “set up” when steps are taken to recruit employees and take premises etc. Expenditure incurred was held to be allowable as business loss. [Ss. 28(i), 29]

Dismissing the appeal of revenue, the Court held that; all expenditure after “setting up” is deductible business expenditure even if the business has not commenced. A business is “set up” when steps are taken to recruit employees and take premises etc. Followed Western India Vegetable Products Ltd. v. CIT (1954) 26 ITR 151 (Bom,)(HC). (AY. 2007-08)

CIT v. Axis Pvt. Equity Ltd. (2017) 391 ITR 370 (Bom.)(HC)

  1. S.37(1) : Business expenditure – Accrued liability – Mercantile system of accounting – Liability for payment of 60 per cent arising during assessment year in question is ascertained liability hence be allowed as deduction. [S. 145]

Dismissing the appeal of the revenue the court held that provision for payment of arrears made in two consecutive years in instalments of 40 per cent and 60 per cent – Liability for payment of 60 per cent arising during assessment year in question – hence ascertained liability was to be allowed. (AY. 2010-11)

CIT v. Haryana Agro Industries Corporation Ltd. (2017) 391 ITR 127 (P&H) ( HC)

  1. S.40(a)(ia) : Amounts not deductible – Deduction at source – Royalty – Transfer of software rights – Provision applies to sale of Copyrights and not sale of Copy righted article – Not liable to deduct tax at source. [Ss. 9(1)(vi), 194J]

Dismissing the appeal of Revenue, the Court held that there is a difference between sale of a ‘copyrighted article’ and the ‘copyright’ itself. S.9(1)(vi) applies only to the latter and not the former. Explanation 4 inserted by FA 2012 w.e.f. 1-6-1976 has to be read and understood only in that context and cannot be expanded to bring within its fold transactions beyond the realm of the provision. The assessee was not liable to deduct tax at source.

CIT v. Vinzas Solutions India Private Limited( 2017) 147 DTR 105 (Mad.)(HC)

  1. S.40(a)(ia) : Amounts not deductible – Deduction at source – If income is not taxable in terms of the Income-tax Act, no disallowance can be made. [S.195]

Allowing the appeal the Court held that before effecting deduction at source one of the aspects to be examined is whether such income is taxable in terms of the Income-tax Act. This aspect had not been considered by the Tribunal while concluding that the assessee had committed a default in not deducting the tax at source. The disallowance under section 40(a)(ia) was not justified.

Sesa Resources Ltd. v. Dy. CIT (2017) 391 ITR 413 (Bom.)(HC)

  1. S.43B: Deductions on actual payment – Amount deposited as custom duty – Held to be allowable deduction

Dismissing the appeal, the Court held that the deposit amounts paid were expenses and within the ambit of section 43B. (AY. 2007-08)

PCIT v. Praveen Saxena (2017) 391 ITR 365 (Delhi)(HC)

  1. S.44 : Insurance company – Profit on sale of investment was held to be not assessable – Circular of CBDT is binding on the revenue [S. 119]

Dismissing the appeal of the Revenue, the Court held that Profit on sale of investment was held to be not assessable. Circular of CBDT is binding on the revenue (AY. 2005-06)

PCIT v. National Insurance Company Ltd. (2007) 393 ITR 52 (Cal) (HC)

  1. S.44BB : Mineral Oils – Computation – Reimbursement of actual expenses was not be excluded while computing the income [S.2(45), 5(2)]

Dismissing the appeal of the assessee, the Court held that Reimbursement of actual expenses was not be excluded while computing the income as section 44BB is a complete code in itself.

Ensco Maritime Ltd. v. ADIT (2017) 244 Taxman 261 ( Uttarakhand)(HC)

  1. S.45 : Capital gains – Full value of consideration is neither market value nor necessarily price stated in document for sale but the price actually arrived at between parties to transaction. [S. 48, 55A]

Dismissing the appeal of the revenue, the Tribunal held that the Assessing Officer is not entitled to determine fair market value merely because parties interrelated. Consideration stated in sale document higher than valuation by stamp authority. Full value of consideration received by or accruing to assessee to be taken into consideration for computing capital gains. Market price of property not relevant for this purpose hence reference to Valuation Officer was without jurisdiction. (AY. 2006-07)

PCIT v. Quark Media House India P. Ltd. (2017) 391 ITR 145/ 245 Taxman 226/ 292 CTR 46 (P&H) (HC)

  1. S.45 : Capital gains – Full value of the consideration – Under value of assets – If the AO does not allege that the assessee received more consideration than is stated in the sale deed, he cannot make an addition to the stated consideration. [Ss.40A(2)(b), 48, 50C, 55A]

Dismissing the appeal of the Revenue the Court held that the AO is not bound to accept the consideration stated in the sale deed. In a case where property is sold between arm’s length parties at a gross undervaluation, the onus is on the assessee to explain and if there is no explanation, the AO is entitled to draw an inference. The presumption against the value being understated (not undervalued) is greater where parties are connected or related. However, if the AO does not allege that the assessee received more consideration than is stated in the sale deed, he cannot make an addition to the stated consideration (AY. 2006-07)

PCIT v. Quark Media House India Pvt. Ltd. (2017) 292CTR 146/ 146 DTR 233 (P & H)(HC)

  1. S.47 : Capital gains – Conversion of partnership into a company – Premature transfer of shares, transferee company is not liable to pay capital gains tax. [S. 45, 47(xiii), 245N]

Application was filed before the AAR on a question as to whether notwithstanding the non-compliance with clause (d) of proviso to section 47(xiii), the assessee was liable to pay capital gain tax. AAR has held that, the assessee was not liable to capital gains tax. On writ by the Revenue, dismissing the petition the Court held that, where there is no gain or profit arises at the time of conversion of partnership firm into a company, in such a situation, notwithstanding non-compliance with clause (d) of proviso to section 47(xiii) by premature transfer of shares, transferee company is not liable to pay capital gains tax.

CIT v. Umicore Finance Luxemborg (2017) 244 Taxman 43 / 291 CTR 174 (Bom.) (HC)

  1. S.54EC : Capital gains – Investment in bonds – The amounts
    received as an advance is eligible for investment in specified bonds. The fact
    that the investment is made prior to the transfer of the asset is irrelevant.
    [S.45]

Dismissing the appeal of revenue the Court held that; an amount received on sale of a capital asset as an advance on the basis of Agreement to Sale and the same being invested in specified bonds before the final sale, would entitle the assessee to the benefit of Section 54EC of the Act.The Tribunal upheld the claim of the assessee by following the decision of its co-ordinate bench in Bhikulal Chandak HUF v. ITO (2009) 126 TTJ 545 (Nag.)(Trib.) wherein it has been held that where an assessee makes investment in bonds as required under Section 54EC of the Act on receipt of advance as per the Agreement to Sale, then the assessee is entitled to claim the benefit of Section 54EC of the Act. The Revenue had preferred an appeal against the order of the Tribunal in Bhikulal Chandak HUF (supra) to this Court (Nagpur Bench) being Income Tax Appeal No. 68 of 2009. This Court by an order dated 22nd August, 2010 refused to entertain the Revenue’s above appeal from the decision of the Tribunal in Bhikulal Chandak HUF (supra). In the above view, the question as proposed for our consideration in the present facts does not give rise to any substantial question of law. (ITA No. 1009 of 2014, dt. 14-12-2016) (AY. 2008-09)

CIT v. Subhash Vinayak Supnekar (Bom.)(HC); www.itatonline.org

  1. S.54F : Capital gains – Investment in a residential house – Failure to deposit the amount of consideration not utilised towards the purchase of new flat in the specified bank account before the due date of filing return of income u/s. 139(1) is fatal to the claim for exemption. [Ss. 45, 139(1)]

The allotment letter issued by the developer does not confer title until the agreement for sale under the provisions of the MOFA is registered. Failure to deposit the amount of consideration not utilised towards the purchase of new flat in the specified bank account before the due date of filing return of income u/s. 139(1) is fatal to the claim for exemption. Humayun Suleman Merchant vs. CCIT is not per incuriam. Assessee is not entitled to exemption. (AY. 2006-07)

Rasiklal M. Parikh v. ACIT (2017) 391 ITR 395/ 80 taxmann.com 22 (Bom)(HC)

  1. S.57 : Income from other sources – Interest on money borrowed for purchase of shares – Interest was held to be deductible [S.56, 57(iii), IT Act, 1922 S.12(2)]

Allowing the appeal the Court held that ; Interest on money borrowed for purchase of shares was held to be deductible. There was no evidence to demonstrate that the shares had been purchased in order to gain control of company. (AY. 1997-98)

Satish Bala Malhotra (Smt.) v. CIT ( 2016) 75 taxmann.com 42 (2017) 391 ITR 256 (P&H)(HC)

  1. S.68 : Cash credit – Share application money – Failure by Assessing Officer to conduct adequate and proper inquiry into materials, no addition can be made [Ss. 147, 148, 151]

Dismissing the appeal of the revenue, the Court held that assessee furnishing documents to evidence genuineness of transactions and identity and creditworthiness of parties. Failure by Assessing Officer to conduct adequate and proper inquiry into materials while invoking section 68, no addition can be made. (AY. 2001-2002)

CIT v. N.C. Cables Ltd. (2017) 391 ITR 11 (Delhi) (HC)

  1. S.68 : Cash credits – Bogus share capital/ premium – The proviso to s. 68 (which creates an obligation on the issuing Co. to explain the source of share capital & premium) has been introduced by the Finance Act, 2012 with effect from 1-4-2013 and does not have retrospective effect. If the AO regards the share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company’s unexplained cash credit

Dismissing the appeal of the Revenue, the Court held that the proviso to s. 68 (which creates an obligation on the issuing Co to explain the source of share capital & premium) has been introduced by the Finance Act, 2012 with effect from 1-4-2013 and does not have retrospective effect. If the AO regards the share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company’s unexplained cash credit. The Court relied on CIT v. Lovely Exports (P) Ltd. 317 ITR 218 (SC). (ITA No. 1613 of 2017, dt. 20-3-2017)(AY.2008-09)

CIT v. Gagandeep Infrastructure Pvt. Ltd. (Bom)(HC) : www.itatonline.org

  1. S.68 : Cash credits – Even if the premium at which the shares are issued defies commercial prudence, the receipt cannot be assessed as “unexplained credit” if the identity of the payer, genuineness of the transaction and capacity of the subscriber are not disputed

Dismissing the appeal of revenue the Court held that, even if the premium at which the shares are issued defies commercial prudence, the receipt cannot be assessed as “unexplained credit” if the identity of the payer, genuineness of the transaction and capacity of the subscriber are not disputed. The Revenue has not been able to show in any manner the factual finding recorded by the Tribunal is perverse in any manner. (AY. 2011-12)

CIT v. Green Infra Limited (2017) 292 CTR 233/146 DTR 262 (Bom)(HC)

  1. S.68 : Cash credits – Bogus capital gains – A transaction cannot be treated as fraudulent if the assessee has furnished documentary proof and proved the identity of the purchasers and no discrepancy is found – The AO has to exercise his powers u/s. 131 & 133(6) to verify the genuineness of the claim and cannot proceed on surmises [Ss. 131, 133(6)]

Dismissing the appeal of the revenue, the Court held that the assessee has adduced the documentary evidences in support of the transaction in question. The identity of the purchasers of the shares was established as it was borne on the record of the Income Tax Department. The purchasers have PAN card as well. Turning to the shares which were sold by the appellant as per its version, there is no evidence or material to even suggest, as pointed out as on behalf of the assessee, that the cheques directly or indirectly emanated from the assessee so that it could be said that the assessee’s own money was brought back in the guise of sale proceeds of the shares. Though, the purchasers of the shares could not be examined by the AO, since they were existing on the file of the Income Tax Department and their Income Tax details were made available to the AO, it was equally the duty of the AO to have taken steps to verify their assessment records and if necessary to also have them examined by the respective AOs having jurisdiction over them which has not been done by him. (ITA Nos. 43/2016 & 44/2016, dt. 18-1-2017)(AY. 2003-04)

PCIT v. Jatin Investment Pvt. Ltd. (Delhi)(HC); www.itatonline.org

  1. S.69C : Unexplained expenditure – Bogus purchases – No quantity details maintained – Failure to produce sellers – Addition was held to be justified

Allowing the appeal of the revenue, the Court held that the findings of the Appellate Tribunal were perverse. The purchases were bogus and all paper transactions were for the purpose of taking benefit of export and tax benefits by the assessee. Mere vouchers of the import and export challans of the customs clearance would not prove physical delivery of the material. There was nothing on record to certify that the precious stones were verified by any valuer. The Commissioner (Appeals) had confirmed the finding of the Assessing Officer and the supplier had specifically contended that they were not transfer by them and were absconding. The Appellate Tribunal had given its finding only on the statement of the power of attorney holder of the supplier. The finding which had been arrived at by the Appellate Tribunal was not in consonance with the provisions of law and therefore, was reversed. The order of the Commissioner (Appeals) was upheld

CIT v. Bright Future Gems (2017) 392 ITR 580 (Raj)(HC)

  1. S.80HHC : Export business –Hundred per cent Export Oriented Undertaking – Export turnover – Deduction cannot be denied where assessee has availed of exemption under section 10B. [S.10B]

Allowing the appeal of the assesse the Court held that section 80HHC of the Act did not preclude the assessee from availing of the deduction thereunder in the event of the assessee having availed of the benefit of section 10B. Wherever the Legislature intended to exclude the benefit under a provision on account of an assessee having availed of a benefit under another provision, it so provided. The fact that section 10B(4)(iii) did not refer to section 80HHC indicated strongly that the Legislature did not intend to deny an assessee who had availed of the benefit of section 10B the deduction under section 80HHC. The assessee manufactured the goods exported by it and, therefore, clause (a) of sub-section (3) of section 80HHC applied to the assessee’s case. The proviso to definition of “total turn over” in Explanation (ba) excluded from the expression “total turnover” sums referred to in section 28(iiia), (iiib) and (iiic) but not sections 10B. The definition of the expression total turnover did not warrant the exclusion of any benefit under section 10B. The nature and benefits under section 80HHC and section 10B were also entirely different. Circular dated December 16, 1988 issued by the Central Board of Direct Taxes provided that section 10B was introduced to confer an additional benefit upon the assessee. Section 80HHC defined the terms “export turnover”, “total turnover” and “profits of business”. None of those definitions excluded the export turnover in respect whereof benefit had been derived under section 10B. The Assessing Officer was to compute the assessee’s income accordingly. (AY. 1998-99)

Mahavir Spinning Mills Ltd v. CIT (2017) 391 ITR 290 (P&H)(HC)

  1. S.80-I : Industrial undertaking – Old machinery used in old unit and depreciation claimed on it in earlier assessment year –Entitled to benefit of deduction on machinery

The assessee was entitled to deduction on the machinery which was put to use by the assessee in its old unit and on which it had claimed depreciation in the earlier assessment year.

CIT v. Popular Art Palace P. Ltd. (2017) 391 ITR 352 (Raj.)( HC)

  1. S.80-IB(10) : Industrial undertaking – Eligible deduction cannot be treated as inflated merely because there are common customers –Matter was set aside to Tribunal. [Ss.80-IB(8), 80(IB)(13)]

Allowing the appeal , the Court held that ; The profits of an undertaking eligible for deduction cannot be treated as “inflated” in the absence of material on record to show that there is an arrangement between the eligible unit and the non-eligible unit to generate more than ordinary profits for the eligible unit. The mere fact that there are common customers of both the units does not by itself indicate transfer of profits to the eligible unit. Matter was set aside to Tribunal to decide according to law. (AY. 2009-10)

Malay N. Sanghvi v. ITO( 2017) 391 ITR 382 (Bom.)(HC)

  1. S.80P : Co-operative societies –Interest received from members – Providing credit facilities to only members hence not co-operative Bank eligible deduction [S.80P(2)(a)(i)]

Dismissing the appeal of the Revenue, the Court held that; a co-operative credit society providing credit facilities to its members alone, and not to general public at large, hence the assessee would not be covered by description of term ‘co-operative bank’ and, thus, would be entitled to seek deduction under section 80P(2)(a)(i).

CIT v. Nilgiris Co-operative Marketing Society Ltd. (2017) 244 Taxman 256 (Mad.)(HC)

  1. S.92B : Transfer pricing –International transactions – Advertisement, marketing and promotion expenditure – Whether outbound business constituted international transaction for which arm’s length price to be determined – Matter remitted to Appellate Tribunal. [S.92C]

Court remanded the matter to the Tribunal to decide whether reporting of AMP expenditure in regard to outbound business constituted an international transaction for which ALP determination was necessary. (AYs. 2009-10, 2010-11)

Le Passage to India Tour and Travels (P) Ltd. v. Dy. CIT (2017) 391 ITR 207/245 Taxman 129/292 CTR 241 (Delhi)(HC)

  1. S.92C : Transfer pricing – Arm’s length price – DEPB includible in determining operating profit and depreciation includible in determining total costs as in comparable companies – Loss suffered in a particular year does not exclude a company from comparability analysis

Dismissing the appeal of the revenue, the Court held that while determining the arm’s length price, DEPB includible in determining operating profit and depreciation includible in determining total costs as in comparable companies. Loss suffered in a particular year does not exclude a company from comparability analysis. (AY. 2008-09)

CIT v. Welspun Zucchi Textiles Ltd. (2017) 391 ITR 211/ 245 Taxman 132/292 CTR 1 (Bom.)(HC)

  1. S.142A : Estimate of value of assets by Valuation Officer –Reference to valuation Officer was held to be not valid, unless there is some material before the Assessing Officer [S.69]

Allowing the appeal of the assesse the Court held that No doubt, it is true that section 142A can be resorted to even during the assessment or after assessment but, at the same time, while making said reference, the officer has to satisfy the conditions precedent which are be reflected in relevant statutory provisions, which in the instant case are completely missing and therefore, no such action is permissible in law. Upon considering the materials on records and the contentions raised by respective parties and in view of the aforesaid proposition of law laid down, it is opined that the action of making reference is not sustainable in the eye of law and therefore it is quashed and set aside.) (AY. 2008-09)

Anand Banwarilal Adhukia v. DCIT (2017) 244 Taxman 243 (Guj.)(HC)

  1. S.143(2) : Assessment – Notice –Notice served on the old address – Assessment was held to be void [Ss. 282, 292BB, General Clauses Act, S.27]

Dismissing the appeal of assessee the Court held that the issue of a notice u/s. 143(2) bearing the wrong (old) address of the assessee does not amount to a valid service of the notice u/s. 282 r.w.s. 27 of the General Clauses Act. The non-service of a notice u/s. 143(2) before the expiry of 12 months from the end of the month in which the return was filed renders the assessment void. As the assessee objected to the same before completion of proceedings, the assessment order is not saved by s. 292BB.In the above view, as the position is self evident on a plain reading of Section 143(2) of the Act read with Section 127 of the General Clauses Act, thus no substantial question of law arises for our consideration. (ITA No. 1382 of 2014,

dt. 7-2-2017)(AY. 2006-07)

CIT v. Abacus Distribution Systems(India)Pvt. Ltd. (Bom)(HC); www.itatonline.org

  1. S.143(3) : Assessment – Bogus purchases – Cross examination – A statement by the alleged vendor that the transactions with the assessee are only accommodation entries and that there are no sales or purchases cannot be relied upon by the AO unless the assessee is given the opportunity to cross-examine the vendor. [S.131]

Dismissing the appeal of Revenue the Court held that the question raised in this appeal is, whether the Tribunal was justified in deleting the addition on account of bogus purchases allegedly made by the assessee from M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. According to the revenue, the Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. in his statement had stated that there were no sales / purchases but the transactions were only accommodation bills not involving any transactions. The Tribunal has recorded a finding of fact that the assessee had disputed the correctness of the above statement and admittedly the assessee was not given any opportunity to cross examine the concerned Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. who had made the above statement. The Appellate Authority had sought remand report and even at that stage the genuineness of the statement has not been established by allowing cross examination of the person whose statement was relied upon by the revenue. In these circumstances, the decision of the Tribunal being based on the fact, no substantial question of law can be said to arise from the order of the Tribunal. The appeal is dismissed with no order as to costs. (ITA No. 4299 of 2009, dt. 22-2-2011)

CIT v. Ashish International (Bom)(HC) ; www.itatonline.org

  1. S.145 : Method of accounting –Valuation of closing stock – Revised return – Tribunal finding that method of valuation by Assessing Officer was correct, question of fact. [S. 139(5), 260A]

Dismissing the appeal of the assesse the Court held that there was no error in the approach of the Assessing Officer as well as the Tribunal as no material to support assessee’s plea of wrong valuation of finished goods needing rectification in return. Assessing Officer was based on sales that were quoted by the assessee in his return and not hypothetical and that normally the stock was to be valued either at the market price or at the cost price and that the assessee had adopted an unrealistic method of valuation. (AY. 1998-99)

Pooja Rice and General Mills v. CIT (2017) 391 ITR 140 (P&H)(HC)

  1. S.145 : Method of accounting –Rejection of accounts – Decline in gross profit– Suppression of sales – Deletion of addition was held to be justified

Dismissing the appeal of the revenue, the Court held that Assessing Officer making addition on account of suppressed sales due to decline in gross profit. Tribunal finding that there was justification for decline in gross profit and deletion of addition as in earlier years. No question of law. (AY. 2006-07)

CIT v. Parth Laboratories P. Ltd. (2017) 391 ITR 70 (Guj.) (HC)

  1. S.145 : Method of Accounting – Gross profit rate – Estimate of 32 per cent to be adopted considering average profit of six years shown by assessee

The Court held that; Assessing Officer estimating gross profit rate at 35 per cent. Commissioner (Appeals) and Appellate Tribunal abruptly deducting profit without assigning reasons. Court held estimate of 32 per cent to be adopted considering average profit of six years shown by assessee.

CIT v. Popular Art Palace P. Ltd. (2017) 391 ITR 352 (Raj.)( HC)

  1. S.145 : Method of accounting –Weighted average cost of valuing stock is an accepted method of accounting, which is approved by Accounting Standard issued by the ICAI. AO is not entitled to disregard the method if the assessee has consistently followed the said method

Dismissing the appeal of the Revenue, the Court held that, in the case of manufacture of jewelry, weighted average cost of valuing stock is an accepted method of accounting, which is approved by Accounting Standard issued by the ICAI. AO is not entitled to disregard the method if the assessee has consistently followed the said method. (AY. 2009-10) (ITA No. 297 of 2014

dt. 6-3-2017)

CIT v. Uday M.Ghare (Bom) (HC) www.itatonlne.org.

  1. S.147 : Reassessment – After the expiry of four years – Brokers client code modification – Failure by assessee to substantiate loss by producing evidence – Assessee participating in reassessment proceedings without pressing its earlier objections raised, reassessment was held to be valid [S.148]

Dismissing the petition, that the Assessing Officer had received credible information regarding income escaping assessment for the relevant assessment year. He had applied his mind to it and had informed the assessee of his intention to invoke section 148 of the Income-tax Act, 1961 and had given his reasons for doing so. The assessee had objected to the reasons furnished by the Assessing Officer for invoking section 148. The assessee had neither insisted upon disposal of its objections filed prior to the reassessment nor had pressed its objections but had participated in the reassessment proceedings. The assessee had also furnished the documents required by the Assessing Officer in the proceedings under section 148 after raising the objections. The conduct of the assessee allowed one to infer that it had waived its rights to have the objections disposed of, or alternatively, the assessee had withdrawn its objections to the invocation of section 148. From the reasons supplied by the Assessing Officer it could be inferred that he had applied his mind to the issue. The assessee had not demonstrated any material to substantiate that the loss from brokers by client code modification being booked in its accounts was placed before the Assessing Officer for consideration and that, the Assessing Officer had taken a view after production of the material facts by the assessee

Rampuria Industries and Investments Ltd v. Dy. CIT (2017) 391 ITR 18 (Cal)(HC)

  1. S.147 : Reassessment – After the expiry of four years – On-money – No new tangible material available showing income escaped assessment – Reassessment notice not valid [Ss.69A, 143(3) 148]

Allowing the petition the Court held that the reopening was not permissible, more particularly in the absence of any other tangible material available with the Assessing Officer that in the year 2005-06, the assessee had received any on-money and when the notice was issued beyond the period of four years and more particularly when the original assessment was done under section 143(3) of the Act. (AY. 2005-06)

Sopan Infrastructure P. Ltd v. ITO (2017) 391 ITR 107/ 78 taxmann.com 170 (Guj.)(HC)

  1. S.147 : Reassessment – Merely because the assessee’s income is “shockingly low” and others in the same line of business are returning a higher income. The invocation of the jurisdiction on the basis of suspicions and presumptions cannot be sustained. [S.148]

Allowing the petition, the Court held that though Explanation 2 of s. 147 authorizes the AO to reopen an assessment wherever there is an “understatement of income”, the AO is not entitled to assume that there is “understatement of income” merely because the assessee’s income is “shockingly low” and others in the same line of business are returning a higher income. The invocation of the jurisdiction u/s. 147 on the basis of suspicions and presumptions cannot be sustained. (WP No. 36483/2016, dt. 13-2-2017) (AY. 2012-13)

Rajendra Goud Chepur v. ITO (AP&T)(HC) : www.itatonline.org

  1. S.147 : Reassessment – A question relating to jurisdiction which goes to the root of the matter can always be raised at any stage – Issue of notice or service of notice in the set aside appeal can be raised – Matter was set aside to Tribunal to decide the jurisdictional issue of reassessment. [S.148]

Allowing the petition the Court held that (i) a question relating to jurisdiction which goes to the root of the matter can always be raised at any stage, be in appeal or revision, (ii) initiation of proceedings under section 147 of the Act and/or service of notice are all questions relating to assumption of jurisdiction to assess escaped income, (iii) if an issue has not been decided in appeal and the matter has simply been remanded, the same can be raised again notwithstanding with the fact that no further appeal has been preferred, (iv) in the reassessment proceedings, relief in respect of item which was not originally claimed can not be claimed again as the reassessment proceedings are for the benefit of the Revenue and (v) relief can only be claimed in respect of the escaped income. The principles laid down by the Apex Court in the case of Sun Engineering Works P. Ltd. would not apply as the appellant is not claiming any deduction or relief on the taxability of any item in the reopened assessment proceedings which had not been claimed in the original assessment. (ITA No. 87 of 2009,

dt. 30-3-2017)(AY. 1997-98)

Teena Gupta v. CIT (All) (HC) : www.itatonline.org

  1. S.147: Reassessment – Unabsorbed depreciation – Reassessment was held to be not permissible [Ss. 32(2), 148]

    Allowing the petition the court held that ; in the absence of any tangible material which alone could be the basis, for reopening of a completed assessment. The Department could not have issued the notice. The benefit of carrying forward the depreciation was limited by the

    pre-existing ruling that, it could be done for eight years. All that the amendment by the Finance Act, 2002 did, with effect from April 1, 2002, was to remove the cap which meant that the previously limited benefit was subjected to such restrictions. The notice was unsustainable and the reassessment was quashed. (AY. 2010-11)

    Motor and General Finance Ltd v. ITO (2017) 393 ITR 60 (Delhi) (HC)

  2. S.151 : Reassessment – Sanction for issue of notice – The mere appending of the word “approved” by the CIT while granting approval to the reopening is not enough – He has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. [Ss. 68, 147, 148]

    Dismissing the appeal of revenue the Court held that; the mere appending of the word “approved” by the CIT is not sufficient. While the CIT is not required to record elaborate reasons, however, he has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. (AY. 2001-02)

    PCIT v. N. C. Cables Ltd. (2017) 391 ITR 11 (Delhi)(HC)

  3. S. 153A : Assessment – Search or requisition – Though no incriminating material was found in the course of search, notice in pursuance of search and assessment thereafter was held to be valid. [S.132]

    Dismissing the appeal of the assessee, the Court held that though no incriminating material was found in the course of search, notice in pursuance of search and assessment thereafter was held to be valid

    E. N. Gopakumar v. CIT (2017) 390 ITR 131/244 Taxman 21 (Ker.)(HC)

  4. S.153C : Assessment – Income of any other person – Search – The requirement that the documents found during search should “belong” to the assessee is a condition precedent and a jurisdictional issue – The non-satisfaction of the condition renders the entire proceedings null and void. [Ss. 69C, 132]

    Dismissing the appeal of the revenue, the Court held that; the requirement that the documents found during search should “belong” to the assessee is a condition precedent and a jurisdictional issue. The non-satisfaction of the condition renders the entire proceedings null and void. The fact that the searched person and the assessee are alleged to be “hand in glove” is irrelevant. In view of the above reasons and particularly the finding of fact that seized document which forms the basis of the present proceedings, do not belong to the petitioner and the same not being shown to be perverse, the question as raised does not give rise to any substantial question of law and thus not entertained. (ITA No. 83 of 2014, dt. 7-2-2017)(AY. 2007-08)

    CIT v. Arpit Land Pvt. Ltd. (Bom.)(HC);
    www.itatonline.org

  5. S.158BC : Block Assessment – Notice could not be issued when no incriminating materials are found during the course of the search. [Ss. 132, 158BC]

    The High Court held that the notice under section 158BC could not have been issued when the search was conducted under mistaken identity and no incriminating material was found during the course of the search as evident from the appraisal report.

    Dr. Gautam Sen v. CCIT (2016 289 CTR 478 /142 DTR 220/74 taxmann.com 128 (Bom.)(HC)

  6. S.158BC : Block assessment – No incriminating material found during search – Additions made on basis of evidence gathered from extraneous source and on basis of statement or document received subsequent to search – Assessing Officer has no jurisdiction to make additions [Ss. 132, 158BB(1)]

    Dismissing the appeal of the revenue the Court held that if no incriminating material was found in the course of search proceedings, additions cannot be made on basis of evidence gathered from extraneous source and on basis of statement or document received subsequent to search. Assessing Officer has no jurisdiction to make additions.

    CIT v. Pinaki Misra (2017) 392 ITR 347 (Delhi)(HC)

  7. S.158BC : Block assessment – Undisclosed income – Additions to income based on facts – Merely because a protective assessment had been made in the hands of assessee’s wife did not ipso facto mean that the assessment of such items of assets at hands of assessee was unsustainable. [S.158BD]

    Dismissing the appeal the Court held that ; additions to income was confirmed on facts hence the order was justified. Merely because a protective assessment had been made in the hands of assessee’s wife did not ipso facto mean that the assessment of such items of assets at hands of assessee was unsustainable.

    R. Ramachandran Nair v. Dy. CIT (2017) 391 ITR 343/ 292 CTR 72/ 78 taxmann.com 110 (Ker) (HC)

  8. S.158BC : Block assessment – Commissioner (Appeals) upholding assessment relying on Supreme Court decisions on different subjects and holding decision in ACIT v. Hotel Blue Moon [2010] 321 ITR 362 per incuriam – On writ the court held that order of CIT(A) was held to be untenable, order was set aside [S. 143(2), Article 226]

    On a writ petition against an order passed by the Commissioner (Appeals) in an appeal against a block assessment, recording a finding that notice under section 143(2) of the Income-tax Act, 1961 was not issued, but holding that the judgment of the Supreme Court in Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362, wherein it was held that block assessment could not be framed until notice under section 143(2) had been served upon the assessee, was per incuriam in view of the two Supreme Court judgments in Govt. of A.P. v. J.B. Educational Society [2005] 3 SCC 212 and State of Punjab v. Shamlal Murari [1976] 1 SCC 719:

    Held, allowing the petition, that the finding recorded by the Commissioner (Appeals) was not tenable as neither of the two Supreme Court judgments referred to or dealt with the case of block assessment and of not serving a notice under section 143(2) of the Income-tax Act, 1961 which issue was raised and decided in Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362 (SC). The Commissioner (Appelas) had committed a grave illegality in holding that such judgment was per incuriam.

    Kiran Prakashan v. Dept. of Income Tax (2017) 391 ITR 31 (Patna)(HC)

  9. S.164: Representative assessees – Charge of tax – Beneficiaries unknown – Where the shares are determinable, the income is to be taxed of that respective sharer or the beneficiaries and not in the hands of the trustees. [S. 161]

    From the order of the ITAT Bengaluru in DCIT vs. India Advantage Fund-VII, the High Court had to consider the following question at the instance of the department:

    “Whether, the Tribunal, on the facts and in the circumstances of the case was right in holding that the assessee trust cannot be assessed as on AOP even though the requirements of section 164(1) were not met, inasmuch as the shares of the beneficiaries were indeterminate/unknown and hence the Assessing Officer was justified in invoking the provisions of section 164(1) of the Act and make the assessee liable to be assessed at the maximum marginal rate in the status of AOP. Hence it is not relevant whether the necessary ingredients for formation of an AOP are fulfilled by the assessee or not?”

    HELD by the High Court dismissing the appeal: the Court held that once shares are found to be determinable the income is to be taxed of that respective sharer or the beneficiaries and not in the hands of the trustees which has already been shown in the present case. (ITA No. 191/2015, dt. 13-2-2015)(AY. 2008-09)

    CIT v. India Advantage Fund-VII (Karn.)(HC);
    www.itatonline.org

  10. S.194-I : Deduction at source – Rent – Payment towards ‘premium’ for the lease (even if paid annually) is a capital payment and is not subject to deduction of tax at source. [Ss. 201, 201 (IA) Transfer of Property Act. S.105]

    In all the cases the petitioners received notice from the income-tax authorities, alleging that they were assessed in default in as much as they had failed to deduct tax at source from the interest component paid to the lessor/authority. The Revenue was prima facie of the opinion that these interest amounts resulted income in the hands of the authority which is facially taxable and that the failure of the assessees, in deducting amounts mandated under section 194I is without legal foundation. The petitioners were served with the notice u/ss. 201, 201(IA) of the Act. Allowing the petitions of the assessees, the Court held that, payment towards ‘premium’ for the lease (even if paid annually) is a capital payment and is not subject to deduction of tax at source. Referred Circular No .35/ 2016 dated 13-10-2016. (WP (C) 8085/2014, C.M. Appl. 18876/2014,

    dt. 16-2-2017)

    Rajesh Project (India) Pvt. Ltd. v. CIT (Delhi)(HC);
    www.itatonline.org

  11. S.199 : Deduction at source – Credit for tax deducted – Since other co-owners had not availed any tax credit out of TDS on rental income, assessee-company would be entitled to enjoy benefit of tax deducted at source in its entirety [S.194-I]

    Dismissing the appeal of the Revenue, the Court held that since other co-owners had not availed any tax credit out of TDS on rental income, assessee-company would be entitled to enjoy benefit of tax deducted at source in its entirety. (AY. 2005-06)

    CIT v. Ganesh Narayan Brijlal Ltd. (2017) 244 Taxman 14 (Cal.)(HC)

  12. S.206C : Collection at source – Cotton wastage – Writ is not maintainable, as the buyers can seek refund by filing returns [Constitution of India, Article 226]

    Petitioner filed a writ petition praying for restraining mill owners from collecting TCS on purchase of cotton waste. Dismissing the petition the Court, held that there was uncertainty regarding applicability of section 206C to cotton waste hence, no direction could be issued to restrain mill owners, to stop collecting TCS on purchase of cotton waste. Further, it was always open to petitioners to seek refund by filing appropriate returns and hence remedy under Act itself was available, thus instant petition would not be maintainable.

    Amarjeet Beeton v. CIT (2017) 391 ITR 124/244 Taxman 240 (P&H)(HC)

  13. S.215 : Advance tax – Interest – Liable to pay interest for short or non-payment of advance tax

    Assessee is Liable to pay interest for short or non-payment of advance tax. (AY. 1976-77)

    E. Merck (India) Ltd v. CIT (2017) 393 ITR 91 (Bom)(HC)

  14. S. 220 : Collection and recovery – Assessee deemed in default –Stay – The AO and CIT cannot straightaway demand payment of 15% of the dues but have to grant complete stay if the assessment is “unreasonably high pitched” or the demand for depositing 15% of the disputed demand leads to “genuine hardship” to the assessee” [S.220(6)]

    Allowing the petition the Court held that CBDT Circular dated 29-2-2016 does not supersede Instruction No. 1914 but modifies it. Both have to be read together. The AO and CIT cannot straightaway demand payment of 15% of the dues but have to grant complete stay if the assessment is “unreasonably high pitched” or the demand for depositing 15% of the disputed demand leads to “genuine hardship” to the assessee”. Commissioner was directed to decide the Review petition filed by the assesse with in a period of two weeks. (WP No. 1339, 1342/2017, dt. 23-2-2017)(AY. 2014-15 )

    Flipkart India Private Limited v. ACIT (Karn.)(HC)
    www.itatonline.org

  15. S.220 : Collection and recovery – Assessee deemed in default – If the AO demands 15% to be paid, the assessee is entitled to approach the Pr. CIT for review of the AO’s decision [S.220(6)]

    Allowing the petition, the Court held that CBDT’s instruction dated 29-2-2016 on stay of demand by the AO does not require the assessee to make a pre-deposit of 15% of the disputed demand. As per the Instruction, if the AO requires the assessee to pay less, or more, than 15% of the demand, the sanction of the Pr. CIT is required. If the AO demands 15% to be paid, the assessee is entitled to approach the Pr CIT for review of the AO’s decision. (Spl. CA No. 5679 of 2017, dt. 28-12-2017)

    Jagdish Gandabhai Shah v. PCIT ( Guj.)(HC) :
    www.itatonline.org

  16. S.222 : Collection and recovery – Certificate to Tax Recovery Officer – Attached property was not sold within three years, attachment order of said property would be deemed to be vacated [Second Schedule, Rule 68B]

    Allowing the petition the Court held that Sub-rule (4) of Rule 68B of II Schedule further clarifies that where the sale of immovable property has not been made within three years as required under Rule 68B to Second Schedule to the Act, the effect would be attachment order of the said property deemed to be vacated. Accordingly the attachment of immovable properties stands vacated.

    K. Venkatesh Dutt v. TRO (2017) 244 Taxman 1 (Karn.)(HC)

  17. S.222 : Collection and recovery – Certificate to Tax Recovery Officer – Since entire tax liability of assessee was wiped off pursuant to order of Tribunal, in such a case, even if revenue’s appeal was entertained by High Court, that by itself would not make assessee as an assessee-in-default – Tax Recovery Officer was directed to lift the attachment of the immoveable property. [S.225]

    Allowing the petition the Court held that since entire tax liability of assessee was wiped off pursuant to order of Tribunal, in such a case, even if revenue’s appeal was entertained by High Court, that by itself would not make assessee as an assessee-in-default. Tax Recovery Officer is directed to pass appropriate orders for lifting the order of attachment of the immovable property of the assessee. (AYs. 2009-10 to 2011-12)

    Coromandel Oils (P.) Ltd. v. TRO (2017) 244 Taxman 165/291 CTR 600 (Mad.)(HC)

  18. S.226 : Collection and recovery – Mortgaged property – Dispute between bank and the Revenue will not affect the purchaser of the property

    The petitioner purchased the mortgaged property. The Tax Recovery Officer issued an order of attachment on property for outstanding tax dues of the directors. On allowing the petition the Court held that mere communication to the bank by the Income-tax Department conveying that Income-tax Department had to recover huge amount of tax from the Director, its HUF and company would not take shape of the attachment of the property which can be so in terms of rule 48 of the procedure for recovery of tax long after the property was sold to ‘A’ who in turn, sold part of it to the petitioner. Even if the bank had disregarded such a communication of the Income-tax department and not shared with the department proceeds of the sale of such property, at best may be a dispute between the income tax department and the bank and in any case, cannot harm the petitioner who was the subsequent purchaser for consideration without notice. On such grounds, petition is allowed. Impugned attachment is lifted qua the properties in question.

    Prajakta M. Shah v. TRO (2017) 244 Taxman 183 (Guj.)(HC)

  19. S.245D : Settlement Commission – Survey – Revised enhanced offer made by the assessee must be considered in the nature of spirit of the Settlement Commission, order of Settlement Commission was upheld. [S. 245C]

    Dismissing the petition of the Revenue against the order of settlement Commission, the Court held that during course of proceedings, if revised enhanced offers are made by assessee, then in nature of spirit of settlement, same is to permitted to be considered by Settlement Commission. (AYs. 2011-12 , 2012-13)

    CIT v. ITSC (2017) 244 Taxman 156 (Guj.)(HC)

  20. S.245D : Settlement Commission – Finding that there had been no full and true disclosure of income and manner in which it was earned, rejection of applications was held to be justified, High Court cannot interfere on finding of fact [Ss. 153A, 245D(2C), 245D (4), Article 226]

    Dismissing the petition the court held that though the applications allowed and order passed under section 245D(2C). Subsequent inquiry under section 245D(3) if it was found that hat there had been no full and true disclosure of income and manner in which it was earned, the rejection of applications under section 245D(4) was justified. High Court under Writ jurisdiction has limited power.

    Bharat Singh v. UOI ( 2016)76 taxmann.com 239/ (2017) 391 ITR 305 (Patna) (HC)

  21. S.245D : Settlement Commission –Commissioner filing report before Settlement Commission does not have any adjudicatory role and is entitled to file writ petition against order of Settlement Commission – Settlement Commission had not properly considered issue of addition or genuineness of claim of advances from others, matter was remanded to Settlement Commission. [Ss. 245C, 245D(4), 245I, Article 226]

    Allowing the Writ petition fled by the Commissioner, the Court held that; Commissioner filing report before Settlement Commission does not have any adjudicatory role and is entitled to file writ petition against order of Settlement Commission – Settlement Commission had not properly considered issue of addition or genuineness of claim of advances from others , matter was remanded to Settlement Commission.

    CIT v. ITSC (2017) 391 ITR 374/ 291CTR 433/ 77 taxmann.com 167 (Ker.)(HC)

  22. S.246 : Appeal – Commissioner (Appeals) – Levy of interest –Where levy of advance tax was disputed only levy of interest was held to be not maintainable
    [S. 215]

    On reference the Court held that where levy of advance tax was disputed only levy of interest was held to be not maintainable. Assessee can seek waiver or reduction before Assessing Officer Authority. (AY. 1976-77)

    E. Merck (India) Ltd. v. CIT (2017) 393 ITR 91 (Bom)(HC)

  23. S.254(1) : Appellate Tribunal –Additional grounds – Assessee must satisfy the Appellate Authority that the ground now raised was bona fide and the same could not have been raised earlier for good reasons [S.80-IA]

    Dismissing the appeal, the Court held that , an additional ground cannot be permitted to be raised if the necessary evidence that the assessee is entitled to the claim is not on record. The fact that claim has been allowed by the AO in a subsequent year and that there is no reason why the claim should not be allowed in the present year is irrelevant. Also, the assessee must satisfy the Appellate Authority that the ground now raised was bona fide and the same could not have been raised earlier for good reasons. (ITA No. 1060 of 2014, dt. 18-4-2017)

    Ultratech Cement v. ACIT (Bom.)(HC) : www.itatonline.org

  24. S.254(1) : Appellate Tribunal – Additional evidence – Ordinarily an application seeking admission of additional evidence under Rules 18 and 29 of ITAT Rules requires an order to be passed. If the ITAT rejects the application, reasons thereof have to be stated. [ITAT R. 18, 29]

    Court held that ordinarily an application seeking admission of additional evidence under Rules 18 and 29 of ITAT Rules requires an order to be passed. If the ITAT rejects the application, reasons thereof have to be stated, however in the present case no injustice is done to the assessee, hence the Tribunal has not committed any error by not passing a separate order on the additional evidence filed before the Tribunal. (AY. 2006-07)

    Rasiklal M. Parikh v. ACIT (2017) 391 ITR 395/ 80 taxmann.com 22 (Bom)(HC)

  25. S.254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – If the assessee voluntarily withdraws the appeal, he cannot seek restoration on the ground that the withdrawal was an apparent mistake

    Dismissing the petition the Court held that; plea that the appeal was mistakenly withdrawn on the advice of Counsel and that the same should be restored should be backed by evidence. If the assessee voluntarily withdraws the appeal, he cannot seek restoration on the ground that the withdrawal was an apparent mistake. (WP No. 2966 of 2016, dt. 1-2-2017)

    Jayant D. Sanghavi v. ITAT (Bom.)(HC); www.itatonline.org

  26. S.254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – The mere placing of a case law in the paper book does not mean that it was cited before the ITAT and non-consideration thereof is not a mistake apparent from the record. [S.254(1)]

    Dismissing the petition the Court held that facts recorded by the ITAT have to be accepted as correct and conclusive and cannot be contradicted by affidavit or otherwise. The mere placing of a case law in the paper book does not mean that it was cited before the ITAT and non-consideration thereof is not a mistake apparent from the record. AMA to rectify such alleged mistake of non-consideration of a judgment must be filed as quickly as possible. (WP. 2844 of 2016, dt. 12-1-2017) (AY. 2002-03)

    Ashish Gandhi Builders & Developers P. Ltd. v. ITAT (Bom.)(HC);
    www.itatonline.org

  27. S.254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – The Tribunal is mandated to pass orders within 90 days of the hearing – Delay is not justified on the ground that ‘administrative clearance’ was obtained. The aggrieved party is entitled to seek recall of such an order [R. 34(5)(c), 34(8)]

    The Tribunal passed an order dated 3rd February, 2016 beyond a period of 90 days after the hearing of the appeal was concluded on 22nd September, 2015. The assessee claimed that this was in breach of Rule 34(5)(c) of the Income Tax Appellate Tribunal Rules, 1963 (Tribunal Rules) as also of the binding decision of this Court in Shivsagar Veg. Restaurant v. ACIT 317 ITR 433. It was also claimed that the delay has also resulted in prejudice to the parties as binding decisions of the co-ordinate benches though referred to were ignored in the order dated 3rd February, 2016. Allowing the petition the Court held that the Tribunal is mandated to pass orders within 90 days of the hearing – Delay is not justified on the ground that ‘administrative clearance’ was obtained. The aggrieved party is entitled to seek recall of such an order. (W.P. No. 2889 of 2016, dt. 12-1-2017)(AY. 2009-10)

    Otters Club v. DIT (E) (Bom.)(HC); www.itatonline.org

  28. S.260A : Appeal – High Court – Limitation – Appeal by department – Receipt of the order by any of the Officer of the department including Commissioner (Judicial) is to be considered for computing the period of limitation –Administrative instructions cannot override the statute. [S.260A(2)(a)]

    Assessee contended that for computing the period of limitation the copy of order was available with the Commissioner (Judicial) to be considered and with the Commissioner (Central). The Department contended that limitation would start to run from the date of service of the order of the Tribunal on the concerned Commissioner having jurisdiction over the assessee. On appeal the Court held that the word “received” occurring in section 260A(2)(a) of the Income–tax Act, 1961, would mean received by any of the named officers of the Department, including the Commissioner (Judicial). The provision names four particular officers, i.e., the Principal Commissioner, Commissioner, Principal Chief Commissioner, and the Chief Commissioner of Income Tax. These were the only designated officers who could receive a copy of the order of the Tribunal by any of those officers in the Department including the Commissioner (Judicial) would trigger the period of limitation. The statute was not concerned with the internal arrangements that the Department might make by changing the jurisdiction of its officers. The limitation would begin to run when a certified copy was received first by either the Commissioner (Judicial) or one of the officers of the Department and not only when the Commissioner “concerned” received it. Administrative, instructions are for the administrative convenience of the Department and would not override the statute, in particular, section 260A(2)(a) of the Act.

    CIT v. Odeon Builders P. Ltd. (2017) 393 ITR 27 (FB) (Delhi) (HC)

  29. S.260A : Appeal – High Court – Delay of 448 days in filing of appeal was not condoned and strictures passed regarding the “standard excuses” of the department for delay in filing appeals, namely, budgetary constraints, lack of infrastructure to make soft copies, change of standing counsel etc.

    Dismissing the appeal of the revenue, the Court held that there is an inordinate delay of 448 days in re-filing the appeal. The Court finds that the standard excuse that the Department is putting forth in all such applications for condonation of delay in re-filing the appeal is two-fold. The first is regarding the budgetary constraints of the Department which delayed payment of the differential court fees as a result of the Court Fees Delhi Amendment Act, 2012 which came into force on 1st August 2012. The second is regarding the practice directions issued by the Court pertaining to filing of soft copies of the paperbooks in tax matters. (ITA No. 934 of 2016, dt. 17-4-2017)

    PCIT v. Diana Builders & Contractors Pvt. Ltd. (Delhi)(HC) :
    www.itatonline.org

  30. S.260A : Appeal – High Court – Territorial jurisdiction –Assessment was at Surat and Appeal was decided by Appellate Tribunal at Punjab – Punjab and Haryana High Court lacks territorial jurisdiction to adjudicate appeal from order of Tribunal. [S. 254(1)]

    Assessment proceedings initiated and final assessment framed at Surat. Appeal filed before Appellate Tribunal in Gujarat but transferred to and disposed of by Tribunal in Punjab because assessee’s head office transferred. Dismissing the appeal the Court held that since the initial process of assessment was started at Surat and the final assessment was framed by the Assessing Officer at Surat, the Punjab and Haryana High Court lacked territorial jurisdiction to adjudicate the matter. (AY. 2001-02)

    CIT v. Balak Capital P. Ltd. ((2017) 391 ITR 112 (P&H)(HC)

  31. S.263: Commissioner – Revision of orders prejudicial to revenue – Cash credits – Share capital premium – Bogus share capital – Onus is on the assessee toprove the creditworthiness of the subscribers – Revision was held to be justified [Ss. 56(2) (viib), 68]

    Dismissing the appeal of the assessees, the Court held that mere fact that payment was received by cheque or that the applicants were companies borne on the file of the Registrar of Companies does not prove that the transaction was genuine. Even under the unamended S. 68, the onus is on the assessee to prove the creditworthiness of the subscribers. Argument that the amendment to S.. 68 is not retrospective is not required to be considered. (ITA No. 178 of 2016, dt. 7-3-2017)

    Pragati Financial Management Pvt. Ltd. v. CIT (Cal)(HC) :
    www.itatonline.org

  32. S.264 : Commissioner – Revision of other orders – Salary received by a non-resident for services rendered abroad accrues outside India and is not chargeable to tax in India. The source of the receipt is not relevant. The CIT has wide powers u/s. 264 and has to exercise them in favour of the assessee in terms of CBDT Circular No. 14 (XL-35) dated 11-4-1955 [Ss. 5(2), 15, 143(1)]

    The petitioner was working as a marine engineer and had rendered services as such to a foreign shipping company during the assessment year 2011-12. The petitioner had filed income tax return for such assessment year under the residential status as non-residential Indian. He disclosed a receipt of a remuneration of

    ₹ 5,63,850/- in US Dollars. The petitioner was issued an assessment order cum intimation under Section 143(1). The petitioner did not file any appeal. The petitio-tax Act, 1961 claiming that the income had accrued outside India and was not taxable in India. The CIT rejected the assessee’s claim. On a Writ Petition by the assessee HELD allowing the claim held that salary received by a non-resident for services rendered abroad accrues outside India and is not chargeable to tax in India. The source of the receipt is not relevant. The CIT has wide powers u/s. 264 and has to exercise them in favour of the assessee in terms of CBDT Circular No. 14 (XL-35) dated 11-4-1955. Relied CIT v. Mahalaxmi Sugar Mills Ltd. (1986) 160) ITR 920 (SC) The matter was remanded to the Assessing Officer to do the needful.

    Utanka Roy v. DIT (2017) 146 DTR 27 (Cal.)(HC),

  33. S.269SS : Acceptance of loans and deposits – Bona fide belief that share application money was neither loans nor deposits, deletion of the penalty was held to be justified. [S. 271D]

    Dismissing the appeal of the revenue the Court held that in the instant case also, the assessee was under the bona fide impression that the money received was only towards allotment of shares and it is not a loan or deposit. Hence, no question of law much less any substantial question of law arises for consideration in the instant appeal. (AYs. 2002-03 to 2004-05)

    CIT v. Object Frontier Software (P.) Ltd. (2017) 244 Taxman 292 (Mad.)(HC)

  34. S.271(1)(c) : Penalty – Concealment – Opinion of chartered accountant – Set off under different head – Levy of penalty was held to be not justified

    Dismissing the appeal of the Revenue the Court held that based on the opinion of chartered accountant set off under different head does not amount to furnishing inaccurate particulars or concealment of income, hence penalty was not leviable. (AY. 2004-05)

    PCIT v. Atotech India Ltd. (2017) 391 ITR 117 (P&H) (HC)

  35. S.271(1)(c) : Penalty – Concealment – Search and seizure – Disclosure in return filed under section 153A amounts to extension of disclosure made under section 132(4), hence penalty cannot be levied [Ss. 132(4), 153A, 153C]

    Dismissing the appeal of the revenue, the Court held that disclosure in return filed under section 153A amounts to extension of disclosure made under section 132(4) hence penalty cannot be levied. (AY. 2002-2003 to 2006-2007)

    PCIT v. Gopal Das Kothari (HUF) (2017) 391 ITR 390 (Cal) (HC)

  36. S.271(1)(c) : Penalty – Concealment – Revised return – Amount disclosed in the revised return – Levy of penalty was held to be not valid. [Ss. 139(1), 153A]

    The High Court had to consider the interpretation and application of Section 271(1)(c) of the Act and Explanation 5 thereto. Two broad issues arose for consideration in this regard:

    (i) Whether under Section 271(1)(c) as it stood prior to the insertion of Explanation 5, levy of penalty is automatic if return filed by the assessee under Section 153A of the Act discloses higher income than in the return filed under Section 139(1)?

    (ii) What would be the position of law after insertion of Explanation 5 and whether it is attracted in the facts of this case?

    Dismissing the appeal of the revenue the Court held that “The word ‘concealment’ inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure, cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under Section 271(1)(c) may be imposed, it has to be proved that

    the assessee has consciously made the concealment or furnished inaccurate particulars of his income.

    In this case, the A.O. in his order noted that the disclosure of higher income in the return filed by the assessee was a consequence of the search conducted and hence, such disclosure cannot be said to be “voluntary”. Hence, in the A.O.’s opinion, the assessee had “concealed” his income. However, the mere fact that the assessee has filed revised returns disclosing higher income than in the original return, in the absence of any other incriminating evidence, does not show that the assessee has “concealed” his income for the relevant assessment years. On this point, several High Courts have also opined that the mere increase in the amount of income shown in the revised return is not sufficient to justify a levy of penalty. (AY. 2005-06, 2006-07)

    PCIT v. Neerj Jindal (2017) 393 ITR 1 (Delhi)(HC)

  37. S.271(1)(c) : Penalty – Concealment – If the quantum appeal is admitted by the High Court, it means that the issue is debatable and penalty cannot be levied. [S. 260A]

    Dismissing the appeal of the revenue, if the quantum appeal is admitted by the High Court, it means that the issue is debatable and penalty cannot be levied. The court also held that the argument of the Dept that CIT v. Nayan Builders and Developers (2014) 368 ITR 722 (Bom.) does not lay down this proposition is not correct. (ITA No. 1498 of 2014, dt. 17-2-2017)(AY. 2006-07)

    CIT v. Advaita Estate Development Pvt. Ltd. (Bom.) (HC);
    www.itatonline.org

  38. S. 271(1)(c) : Penalty –Concealment – Failure by the AO to specify in the
    S. 274 notice whether the penalty is being initiated for ‘furnishing of
    inaccurate particulars of income’ or for ‘concealment of income’ is fatal. It
    reflects non-application of mind and renders the levy of penalty invalid. [S.
    274]

    Dismissing the appeal of revenue, the Court held that failure by the AO to specify in the s. 274 notice whether the penalty is being initiated for ‘furnishing of inaccurate particulars of income’ or for ‘concealment of income’ is fatal. It reflects non-application of mind and renders the levy of penalty invalid. Followed CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar.) (HC). (ITA No. 1154 of 2014, dt. 5-1-2017)

    CIT v. Samson Perinchery (Bom)(HC); www.itatonline.org

  39. S.271(1)(c) : Penalty – Concealment – Disclosure of income after detection, levy of penalty was held to be justified. [S.142(1), 143(2)]

    Dismissing the appeal of the assessee the Court held that; a disclosure of income, or withdrawal of claim for deduction, by the assessee after a specific notice under section, 142(1)/143(2) notice is issued cannot be said to be a “voluntary disclosure” so as to avoid the levy of penalty. The argument that the earlier non-disclosure of income/wrong claim for expenditure was due to “mistake” is not an acceptable. (AY. 2007-08)

    Samson Maritime Ltd. v. CIT (2017) 393 ITR 102 (Bom)(HC)

  40. S.271F : Penalty – Failure to furnish – Reasonable cause for non filing of return will also a reasonable cause for non levy of penalty [S. 153A]

    Allowing the appeal of the assessee, the Court held that ; where a cause is found to be reasonable for non-filing of return immediately in response to notice issued under section 153A, such cause can also be construed as a reasonable cause, while considering as to whether penalty has to be levied under section 271F. Accordingly ;the writ petition is allowed and the impugned orders levying penalty under section 271F is set aside. (AY. 2008-09 to 2014-15)

    S. Jayanthi Shri v. ACIT (2017) 244 Taxman 295 (Mad.)(HC)

  41. S.279 : Offences and prosecution – Compounding of offences – Failure by assessee to deposit amount deducted as tax at source was beyond its control, Order rejecting application for compounding not sustainable – Guidelines issued by CBDT do not bar for consideration of application of offence having regard to facts of the case. [Ss. 276B, 279(2)]

    Allowing the petition the Court held that ; failure by assessee to deposit amount deducted as tax at source was beyond its control, Order rejecting application for compounding not sustainable – Guidelines issued by CBDT do not bar for consideration of application of offence having regard to facts of the case.

    Sports Infratech P. Ltd. v. Dy. CIT (2017) 391 ITR 98/246 Taxman 21 (Delhi)(HC)

  42. S.279 : Offences and prosecutions – Compounding of an offence – No time limit is prescribed – The CBDT has no jurisdiction to demand that the assessee pay a ‘pre-deposit’ as a pre-condition to considering the compounding application

    Allowing the petition the Court held that as, there is no time limit prescribed for filing an application for compounding of an offence, the CBDT is not entitled to reject an application on the ground of ‘inordinate delay’. The CBDT has no jurisdiction to demand that the assessee pay a ‘pre-deposit’ as a pre-condition to considering the compounding application. The larger question as whether in the garb of a Circular the CBDT can prescribe the compounding fee in the absence of such fee being provided for either in the statute or prescribed under the rules is left open. (WP No. 6825/2016, dt. 11-4-2017)

    Vikram Singh v. UOI (Delhi)(HC): www.itatonline.org

  43. S.281 : Certain transfers to be void – Recovery of tax – Order declaring purchase void in breach of principles of natural justice and to be quashed

    Allowing the petition the court held that before passing the order under section 281(1) of the Act, no opportunity of being heard was given to the transferee. Therefore, the order under section 281(1) of the Act was absolutely in breach of the principles of natural justice and deserved to be quashed and set aside.

    Arvindkumar Kuberbhai Patel v. Dy. CIT (2017) 391 ITR 103 (Guj.) (HC)

    Interpretation of taxing statutes

  44. Precedent – Supreme Court decision

It is axiomatic that a decision of the Supreme Court does not make the law but it only declares the law as always existing since its inception.

E. Mark (India) Ltd. v. CIT (2017) 393 ITR 91 (Bom)(HC)

“Those who cannot work with their heart achieve, but a hollow, half-hearted success that breeds bitterness all around.”

— Dr. A. P. J. Abdul Kalam

“All of us do not have equal talent, but all of us have an equal opportunity to develop our talents.”

— Dr. A. P. J. Abdul Kalam

Posted in May.

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