S.4 : Income chargeable to tax – Capital or revenue – Sales tax subsidy for expansion and diversification of existing unit is held to be capital receipt
Dismissing the appeal of the revenue the Court held that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined having regard to the purpose for which the subsidy is given. The source of funds is quite immaterial. Where a subsidy though computed in terms of sales tax deferment or waiver, in essence was meant for capital outlay expended by the assessee for setting up the unit in the case of a new industrial unit and for expansion and diversification of an existing unit, it would be a capital receipt. (AY.2004–05)
CIT v. Nirma Ltd. (2017) 397 ITR 49 (Guj.)(HC)
S.5 : Scope of total income – Classification of asset from current to fixed and consequent valuation of such asset at market value does not give rise to income
Assessee had a plot of land at Lucknow which was being disclosed in the past as current assets. Book value of the plot was quite less than the market value. Assessee recharacterised the asset as fixed asset and showed it at market value and created a revaluation account in the books. Dismissing the appeal of the revenue the Court held that conversion of asset from current to fixed and consequent valuation of the asset at market value does not give rise to any income in the hands of the assessee.
CIT v. M.I. Builders (P.) Ltd. (2017) 248 Taxman 37 (All.)(HC)
S.10A : Free trade zone – Derived from – The incidental activity of parking surplus funds with banks or advancing of staff loans by assessees is an integral part of their export business activity and a business decision taken in view of the commercial expediency is eligible for deduction, said income cannot be taxed as income from other sources [S.10B, 56]
The incidental activity of parking surplus funds with banks or advancing of staff loans by assessees covered u/s. 10A or 10B is an integral part of their export business activity and a business decision taken in view of the commercial expediency. Such incidental income cannot be delinked from the profits and gains derived by the undertaking engaged from the export of specified goods and cannot be taxed separately u/s. 56 of the Act. (ITA No. 812/2007, dt. 30-10-2017) (AY. 2001-02)
CIT v. Hewlett Packed Global Soft Ltd. (Karn.) (FB) (HC) www.itatonline.org
S.10A : Free trade zone – Units were set up with fresh investments – Separate books of account are maintained – Business of each unit is independent, distinct, separate and not related with other, entitled to deduction
Dismissing the appeal of the revenue the Court held that the AO in his remand report had specifically observed that both units were set up with fresh investments. The assessee purchased plant and machinery for these units and it was not the case that these units were formed by splitting or reconstructing existing business. Separate books of account were maintained. The employees of each of the units were fresh set of employees and were not transferred from the existing business. The nature of activity of both units was totally different. The customers of each unit were completely different and unrelated and both the units had new and independent sources of income. Thus, unit II and unit III were not formed by reconstruction of earlier business nor were they expansions thereof. Though permission was sought by way of an expansion, the facts on record categorically and succinctly established that the business of unit II and unit III was independent, distinct and separate and they were not related with each other or even with unit I. Therefore, the assessee was entitled to benefit under section 10A of the Act
PCIT v. Hinduja Ventures Ltd. (2017) 397 ITR 139 (Bom.)( HC)
S.12AA : Procedure for registration – Trust or institution – At the time of registration of trust only the genuineness of the objects has to be tested and not the activities [S. 11, 12]
Dismissing the appeal of the revenue the Court held that at the time of registration of a charitable institution u/s. 12AA, the CIT is not required to look into the activities, where such activities have not or are in the process of its initiation. The registration cannot be refused on the ground that the trust has not yet commenced the charitable or religious activity. At this stage, only the genuineness of the objects has to be tested and not the activities, unless such activities have commenced. (ITA No. 33 of 2017, dt. 7-9-2017)
CIT v. Shreedhar Sewa Trust (All.)(HC); www.itatonline.org
S.14A : Disallowance of expenditure – Exempt income –Without recording the satisfaction no disallowance can be made [R. 8D]
Dismissing the appeal of the revenue the Court held that; The AO is not entitled to make any disallowance under Rule 8D if he does not specifically record that he is not satisfied with the correctness of the assessee’s claim. The fact that the CIT(A) and ITAT were not satisfied with the assessee’s disallowance and enhanced it does not mean that Rule 8D becomes applicable and the disallowance should be computed as per the prescribed formula. (ITA No. 487 of 2015. dt. 19-9-2017)(AY. 2008-09)
PCIT v. Reliance Capital Asset Management Ltd. (Bom)(HC), www.itatonline.org
S.14A : Disallowance of expenditure – Exempt income –Recording of satisfaction is mandatory, disallowance of administrative expenses was held to be not justified – Sufficient interest free fund to demonstrate that borrowed amount was not invested in shares and securities, ITAT was not justified in setting aside the matter to the AO [R. 8D, 254(1)]
Court held that; since there was a failure by the AO to comply with the mandatory requirement of Section 14A(2) of the Act read with Rule 8D (1)(a) of the Rules and record his satisfaction as required thereunder, the question of applying Rule 8D(2)(iii) of the Rules did not arise hence disallowance of administrative expenses was held to be not justified. As regards disallowance of interest the Court held that, ITAT erred in remanding the matter concerning deletion of disallowance of any interest under clause (ii) of Rule 8D(2) of the Act to the AO for fresh determination in light of the decision in CIT v. Taikisha Engineering India Limited (2015) 370 ITR 338 (Delhi) (HC). The effect is that the assessee’s appeal before the ITAT on the issue of Section 14A read with Rule 8D of the Rules must be treated as allowed and the revenue’s appeal on the said issue must be treated as dismissed. ( ITA No. 548/2015, dt. 23-8-2017)(AY. 2008-09)
H. T. Media Limited v. PCIT (Delhi)(HC), www.itatonline.org
S.28(i) : Business loss – Foreign cars – not forming part of a block of assets – not granted depreciation – Held, on sale, provision of S. 50 is not applicable – Held, loss on sale is a business loss. [S. 2(11), 50]
The High Court held that since the foreign cars did not form part of a block of assets and, admittedly, were not granted depreciation as depreciation was not allowable in respect of foreign cars for the relevant period, provisions of section 50 was not applicable and the loss arising from sale of car was to be allowed as business loss as the foreign cars were utilised
in the business of the assessee. (AY 1999-2000, 2000-01)
Madan, K. D. v. ITO (2017) 152 DTR 21/248 Taxman 157 / 297 CTR 437 (Mad.)(HC)
S.36(1)(iii) : Interest on borrowed capital – Where money was advanced to the subsidiary out of reserves and not out of interest paid borrowings, interest paid on borrowings was deductible
Dismissing the appeal of the revenue the Court held that deduction in respect of interest was allowable as it was ascertained that no interest bearing funds were used for advancing the sums to the subsidiary company and that the assessee had sufficient reserves.
CIT v. Golden Tobacco Ltd. (2017) 248 Taxman 101 (Bom.)(HC)
S.36(1)(vii) : Bad debt – Held, embargo placed in section 36(2) as to whether debts had been offered to tax in earlier years would not apply in case of non-banking financial company [S.36(2)]
Assessee, a non-banking financial company claimed deduction of bad debts written off in books – Revenue called for proof showing that amounts claimed as bad debts had been offered to tax in earlier years in accordance with provisions of section 36(2). High Court held that embargo placed in section 36(2) would not apply in case of non-banking financial company all that remained was to examine if debt had been written off in accordance with mandate of section 36(1)(vii). (AY 2004-05)
Operating Lease & Hire Purchase Co. Ltd. v. Dy. CIT (2017) 247 Taxman 423 (Mad.)(HC)
S.37(1) : Business expenditure – Capital or revenue – legal expenditure to protect lease is held to be revenue expenditure
Dismissing the appeal of revenue the Court held that legal expenditure incurred by the assessee to defend the writ petitions filed to quash the Government notification and lease deed was not a capital expenditure and deduction was allowable (AYs. 2008-09, 2009-10)
Dy. CIT v. Kumara Gowda (2017) 396 ITR 386 (Karn) (HC)
S.37(1) : Business expenditure –Expenses on voluntary retirement scheme is held to be allowable as business is continued
Dismissing the appeal of the revenue the Court held that expenses on voluntary retirement scheme is held to be allowable as business is continued. (AY. 2000-01)
CIT v. Aventis Pharma Ltd. (2017) 396 ITR 688 (Bom.) (HC)
S.68 : Cash credits – NRI gifts – Burden is on assessee – Though books of account is not maintained addition is held to be justified
Dismissing the appeal of the assesse, the Court held that a argument that the assessee did not maintain “books of account” and so S. 68 will not apply is not acceptable. It is incumbent on every assessee doing business to maintain proper books of account. It may be in any form. If the assessee has not done so, he cannot be allowed to take advantage of his own wrong. Burden lies on the assessee to show from where he has received the amount and what is its nature. When even after giving opportunities, the appellant had failed to produce relevant documents and explain the nature and source of the amount received by him hence the order of the Assessment Officer and the appellate authorities in respect of those amounts is justified. (ITA No. 636 of 2015, dt. 24-8-2017)(AY. 1996-97)
Arunkumar J. Muchhala v. CIT (Bom.)(HC); www.itatonline.org
S.68 : Cash credits – Mere identity of lender is not sufficient to establish the genuineness of the transaction, addition as unexplained cash credits is held to be justified
Allowing the appeal of the revenue the Court held that the use of deceptive loan entries to bring unaccounted money into banking channels plagues the legitimate economy of our country. The mere fact that the identity of the lenders is established & payments are made by cheques does not mean they are genuine. If the lenders do not have the financial strength to lend such huge sums and if there is no explanation as to their relationship with the assessee, no collateral security and no agreement, the transactions have to be treated as bogus unexplained credits. (ITA No. 55/2017, dt. 25-8-2017)(AY. 2011-12)
PCIT v. Bikram Singh (Delhi)(HC); www.itatonline.org
S.68 : Cash credits – Share premium – Capital or revenue – Amendment is effective from 1-4-2013 hence amount received as share premium cannot be assessable for the AY. 2012-13 [S. 2(24)]
Dismissing the appeal of the revenue the Court held that the amounts received on issue of share capital including premium were on capital account and could not be considered to be income. The definition of income as provided under section 2(24) of the Income-tax Act, 1961 at the relevant time did not define income as any consideration received for issue of share in excess of its fair market value. This came into the statute only with effect from April 1, 2013 and thus, would have, no application to the share premium received by the assessees in the previous year relevant to the assessment year 2012-13. Similarly, the amendment to section 68 of the Act by addition of a proviso was made subsequent to previous year relevant to the subject assessment year 2012-13 and could not be invoked. The share premium could not be taxed.
PCIT v. Apeak Infotech (2017) 397 ITR 148 (Bom.)(HC)
S.68 : Cash credits – Share application money – Merely because, failure of the parties to appear before the AO, additions cannot be made, when the assessee had produced other documentary evidence to prove the genuineness of the transaction. [S.260A]
Dismissing the appeal of the revenue the Court held that failure by the parties who had paid the share application money and to whom the share certificates were issued to appear before the Assessing Officer and the fact that the summons could not be served at the addresses given, as they were not traced and that in respect of some of the parties who had appeared before the Assessing Officer it was found that just before the issuance of cheques, the amounts were deposited in their account, did not negate the case of the assessee. The Assessing Officer could not have added the share application money under section 68 only on that ground. The Appellate Tribunal had considered the fact that the assessee had produced on record the documents, such as the permanent account number of all the creditors along with the confirmation, their bank statements showing payment of share application money, to establish the genuineness of the parties. It had also recorded that the assessee had produced the entire records regarding the allotment of shares to those parties, their share application forms, allotment letters and share certificates and the profit and loss accounts of those parties disclosed that they had sufficient funds in their accounts for investing in the shares of the assessee. No question of law arose.
CIT v. Orchid Industries P. Ltd. (2017) 397 ITR 136 (Bom.)(HC)
S.68 : Cash credits – “Peak Credits” – Unless the assessee is able to show that money has been transferred through banking channels from the bank account of creditors to the bank account of the assessee, the identity of the creditors and that the money paid from the accounts of the assessee has returned to the bank accounts of the creditors. The assessee has to discharge the primary onus of disclosure in this regard. Peak credits theory cannot be applied
Allowing the appeal of the revenue, the Court held that an accommodation entry provider wanting to avail the benefit of the ‘peak credit’ has to make a clean breast of all the facts within his knowledge concerning the credit entries in the accounts. He has to explain with sufficient detail the source of all the deposits in his accounts as well as the corresponding destination of all payments from the accounts. The assessee should be able to show that money has been transferred through banking channels from the bank account of creditors to the bank account of the assessee, the identity of the creditors and that the money paid from the accounts of the assessee has returned to the bank accounts of the creditors. The assessee has to discharge the primary onus of disclosure in this regard. In cases where the Assessee discharges the initial onus of establishing the identity and creditworthiness of the credit provider and the genuineness of the transaction, be it one of loan or subscribing to share capital, the onus shifts to the revenue to show the contrary. Where, for instance, an Assessee furnishes the complete details of the entity like its certificate of incorporation, PAN number, income tax returns, bank accounts, names and addresses of the directors and so on, the Courts have insisted on the AO to make a proper enquiry to examine the identity and creditworthiness of such companies and the genuineness of the transactions in question. Where the AO fails to make such an enquiry, a Court might delete the additions made by the AO. The present case, however, is of a different nature. Here, we are dealing with an Assessee who does not deny that he is an accommodation entry provider. He, in fact, makes no bones of the fact that he either owned or floated ‘paper companies’ only for that purpose. He also does not dispute the fact that he has not been able to explain the source of all the deposits in his accounts or the ultimate destination of all the outgo from his accounts. The assessee’s plea that he should be taxed only on a composite ‘peak credit’ is based entirely on principles of accountancy. He questions the logic behind allowing peak credits for some of the credit entries by way of cheques and denying it for the other entries in cash. He also questions the practice of working out separate peak credits for cheque and cash transactions. Accordingly the order of ITAT is set aside and the order of the AO is restored to file. (ITA No. 115/2005, dt. 4-8-2017)( AY. 1995-96)
CIT v. D. K. Garg (Delhi)(HC) www.itatonline.org
S.80IA : Industrial undertakings – Infrastructure development –Initial assessment year – Once the requirements of the section are satisfied in the first year, the deduction cannot be withdrawn in the subsequent years
Dismissing the appeal of the revenue the Court held that eligibility to claim deduction u/s. 80-IA had to be seen only in the first year. Therefore, once the assessee satisfied the requirements of being a ‘small scale industrial undertaking’ in the first year, the deduction u/s. 80-IA could not be denied in the subsequent years merely because there were fresh investments in those years.
CIT v. International Tractors Ltd. (2017) 155 DTR 243 (Delhi)(HC)
S.80IA : Industrial undertakings – Infrastructure development – AO should give reasons to reject the books of account, hence estimate of profit by the AO was held to be not justified [Ss.80IA(8), 145]
Dismissing the appeal of the revenue the court held that the AO should give reasons to reject the books of account, hence estimate of profit by the AO was held to be not justified. (AYs. 2006-07, 2007-08)
PCIT v. Harpreet Kaur (2017) 397 ITR 125 (Delhi) (HC)
S.92C : Transfer pricing – Recharacterising the function as a merchant banker was held to be not justified – Steps to be undertaken in identification of comparable transactions/entities while fixing the ALP and the margin
Allowing the appeal of the assessee the Court held that recharacterising the function as a merchant banker was held to be not justified. Court also held that though the TNMM method allows broad flexibility tolerance in the selection of comparables, broad functionality is not sufficient to find the comparable entity. There must be similarity with the controlled transaction. (ITA No. 350/2016, dt. 18-9-2017)(AY. 2009-10)
Avenues Asia Advisors Pvt. Ltd. v. DCIT (Delhi)(HC) www.itatonline.org
S.92C : Transfer pricing –Comparable – Functional profile may not be relevant for comparison – Exclusion of comparable was held to be justified
Dismissing the appeal of the revenue the Court held that a giant risk taking company like Infosys Technologies with huge significant intangibles and having huge assets leading to the exorbitant turnover is not comparable with a captive unit which is subject to minimum/ limited risk. The fact that the functional profile of Infosys is similar to that of the assessee is irrelevant. (ITA. No. 767/ 2017, dt. 25-9-2017)(AY. 2007-08)
CIT v. Ut. Starcom Inc. (India Branch)(Delhi)(HC) www.itatonline.org
S.92 : Transfer pricing – Arm’s length price – Broker’s quote based on price publications including stock exchange and commodity market quotation can be used in the CUP method
AO rejected the Comparable Uncontrolled Price (CUP) method adopted by the assessee as the price charged or paid was on the basis of a broker quote which was given taking into account the prices prevailing in the market and the same did not reflect the price of an actual transaction. ITAT reversed the order of the lower authority and held that Rule 10D(3)(c) of the Income-tax Rules, 1962 envisages that the TPO should take into consideration price publications including stock exchange and commodity market quotations. Therefore, such published data available from stock or commodity exchanges could form the basis of the prices in both uncontrolled and controlled transactions. HC held that the reasoning of the ITAT cannot be said to be perverse and therefore no substantial question of law arose.
CIT v. Cargill Foods India Ltd. (2017) 155 DTR 129 / 296 CTR 380 (Delhi)(HC)
S.115JB : Book profit – Insurance companies – Insurance companies are not taxed on commercial profits but on profits as computed under the Insurance Act. Accordingly, income earned on sale/redemption of investments is not chargeable to tax [S.44 ]
Allowing the appeal of the assessee, the Court held that as Insurance companies are required to prepare accounts as per the Insurance Act and not as per Schedule VI to the Companies Act, S. 115JB does not apply. Insurance companies are not taxed on commercial profits but on profits as computed under the Insurance Act. Accordingly, income earned on sale/redemption of investments is not chargeable to tax. (ITA 372/448/2015, dt. 30-8-2017) (AY. 2005-06)
Oriental Insurance Co. Ltd. v. DCIT (Delhi)(HC); www.itatonline.org
S.127 : Power to transfer cases – Once order for transfer of case is set aside by the High Court, subsequent notice issued u/s. 158BC is unjustified [S. 158BC]
Assessee was being assessed at Madhya Pradesh. Search was carried out at the assessee’s place. Thereafter, the assessee’s case was transferred u/s. 127 to Nagpur. High Court quashed the order u/s. 127 and directed the Commissioner to pass a fresh reasoned order. Meanwhile, notice was issued u/s. 158BC by the AO at Nagpur calling upon the assessee to file a return of income. Thereafter, the Commissioner passed a fresh order upholding the transfer of case to Nagpur. High Court held that the notice u/s. 158BC was issued on 22-9-1999 i.e. after the order of transfer dated 6-7-1999 was quashed and set aside. As the notice dated 22-9-1999 issued u/s. 158BC of the Act was issued by the DCIT, who was not the Assessing Officer of the assessee. Consequently, the notice being without jurisdiction, all the proceedings subsequent thereto were without authority of law. High Court further held that transfer of proceedings u/s. 127 cannot be retrospective so as to confer jurisdiction on a person who does not have it.
CIT v. Lalitkumar Bardia (2017) 155 DTR 1 (Bom.)(HC)
S.132 : Search and seizure – Severe strictures passed to condemn the illegal practice of the Dept. of collecting undated cheques from taxpayers after search/ survey without even quantifying the extent of duty evasion. Attempt of the unscrupulous officers is to ‘negotiate’ the evaded duty by threats and coercion. It is not rule of law but anarchy unleashed by holders of public office. It is an abuse of law which has to be stopped – Central Vigilance Commissioner (CVC) is directed to issue the guide lines. [Central Excise Act, 1944]
Allowing the petition the Court held that ; practice of the Dept. of collecting undated cheques from taxpayers after search/ survey without even quantifying the extent of duty evasion. Attempt of the unscrupulous officers is to ‘negotiate’ the evaded duty by threats and coercion. It is not rule of law but anarchy unleashed by holders of public office. It is an abuse of law which has to be stopped. Central Vigilance Commissioner (CVC) is directed to issue the guidelines. (W.P.(C) 3070/2017 & CM No. 13393/2017, dt. 15-5-2017)
Digipro Import & Export Pvt.Ltd. v. UOI ( Delhi)(HC), www.itatonline.org
S.132 : Search and seizure – Additions cannot be made post search on the basis of the books of account which were already submitted at the time of regular assessment [S. 143(3)]
Assessments were completed u/s. 143(3). Thereafter search took place at the assessee’s premises. AO made certain additions on the ground that the accounts maintained by the assessee and found at the time of search were different from the ones which were submitted by the assessee at the time of regular assessment in as much as the same did not tally with the corresponding accounts of the creditors and debtors. High Court held that if assessment is allowed to be reopened on the basis of search in which no incriminating material had been found, merely on the basis of further investigating the books of account which had been already submitted by the assessee and accepted by the AO at the time of regular assessment, the same would amount to the Revenue getting a second opportunity to reopen the concluded assessment, which was not permissible under the law.
CIT v. Lancy Constructions (2016) 144 DTR 70/ 295 CTR 454/ 237 Taxman 728 (Karn.) (HC)
S.144 : Best judgment assessment – Rejection of books of account – Estimate of wastage during survey proceedings – Report of ceramic research laboratory stating that quantum of wastage variable –input /output ratio – deletion of additions was held to be justified [Ss. 69C, 133A, 145(3)]
Dismissing the appeal of the revenue, the Court held that, rejection of books of account merely on the basis of estimate of wastage during the survey was held to be not justified when the assessee has produced the repot of Ceramic Research Laboratory stating that quantum of wastage variable. Addition based on input /output ratio was held to be justified.
CIT v. Ceramic Industries (2017) 396 ITR 50 (Raj.) (HC)
S.144C : Reference to dispute resolution panel – Limitation –Order rejecting objection on ground that it was barred by limitation is to be considered as confirmation of draft order passed by AO as contemplated u/s. 144C(8) [S.143(3)]
The High Court held DRP might confirm, reduce or enhance the variation proposed in draft order. The present order was an order rejecting objections. High Court held that the said rejection was nothing but confirmation of draft order passed by AO, as contemplated u/s. 144C(8). Accordingly, it was held that the final order passed by the AO was certainly order passed u/s. 144C(13). (AY. 2012-13 )
Inno Estates (P) Ltd. v. DRP (2017) 154 DTR 112 (Mad.)(HC)
S.145 : Method of accounting – Income computation and disclosure standards (ICDS) has to be read down to restrict power of the Central Government to notify ICDS that do not seek to override binding judicial precedents or provisions of the Act. If S.145(2) is not so read down it would be ultra vires the Act and Article 141 read with Articles 144 and 265 of the Constitution. The ICDS which overrule the provisions of the Act, the Rules thereunder and the judicial precedents applicable thereto, are struck down as ultra vires the Act. To that extent, Notification Nos. 87 and 88 dated 29-9-2016 and Circular No. 10 of 2017 issued by the CBDT are also held to be ultra vires the Act and struck down as such. [Ss.44AB, 145(2), Articles, 14, 19, 141, 145, 265]
The High Court had to consider the following questions:
(i) Whether the amendments to Section 145 are an instance of delegation by the Parliament of essential legislative powers to the Central Government?
(ii) Are the ICDS an instance of excessive delegation of legislative powers? Whether the impugned ICDS are contrary to the settled law as explained in various judicial precedents and are, therefore, liable to be struck down?
(iii) Whether the impugned amendments to Section 145 of the Act and the consequential ICDS and Circular violate Articles 14, 19(1)(g), 141, 144 and 265 of the Constitution?
HELD by the High Court
(i) Section 145(2), as amended, has to be read down to restrict power of the Central Government to notify ICDS that do not seek to override binding judicial precedents or provisions of the Act. The power to enact a validation law is an essential legislative power that can be exercised, in the context of the Act, only by the Parliament and not by the executive. If Section 145(2) of the Act as amended is not so read down it would be ultra vires the Act and Article 141 read with Articles 144 and 265 of the Constitution.
(ii) The ICDS is not meant to overrule the provisions of the Act, the Rules thereunder and the judicial precedents applicable thereto as they stand.
(iii) The decision in J. K. Industries Ltd. v. Union of India (supra) is distinguishable in its application to the case on hand.
(iv) ICDS I which does away with the concept of ‘prudence’ is contrary to the Act and binding judicial precedents and is therefore unsustainable in law.
(v) ICDS II pertaining to valuation of inventories and eliminates the distinction between a continuing partnership business after dissolution from one which is discontinued upon dissolution is contrary to the decision of the Supreme Court in Shakti Trading Co. (supra). It fails to acknowledge that the valuation of inventory at market value upon settlement of accounts of the outgoing partner is distinct from valuation of the inventory in the books of the business which is continuing. ICDS II is held to be
ultra vires the Act and struck down as such.
(vi) The treatment to retention money under Paragraph 10(a) in ICDS-III will have to be determined on a case-to-case basis by applying settled principles of accrual of income. By deploying ICDS–III in a manner that seeks to bring to tax the retention money, the receipt of which is uncertain/conditional, at the earliest possible stage, irrespective of the facts, the respondents would be acting contrary to the settled position in law as explained in the decisions referred to in para 68 and to that extent para 10 (a) of ICDS III would be rendered ultra vires.
(vii) Para 12 of ICDS III read with para 5 of ICDS IX, dealing with borrowing costs, makes it clear that no incidental income can be reduced from borrowing cost. This is contrary to the decision of the Supreme Court in CIT v. Bokaro Steel Limited (supra) and is therefore struck down.
(viii) Para 5 of ICDS-IV requires an Assessee to recognise income from export incentive in the year of making of the claim if there is ‘reasonable certainty’ of its ultimate collection. This is contrary to the decision of the Supreme Court in Excel Industries (supra), and is, therefore, ultra vires the Act and struck down as such.
(ix) As far as para 6 of ICDS IV is concerned, the proportionate completion method as well as the contract completion method have been recognised as valid method of accounting under the mercantile system of accounting by the Supreme Court in CIT v. Bilhari Investment Pvt. Ltd. (supra) and this Court in CIT v. Manish Buildwell Pvt. Ltd and Paras Buildtech India Pvt. Ltd. v. CIT (supra). Therefore, to the extent that para 6 of ICDS IV permits only one of the methods, i.e., proportionate completion method, it is contrary to the above decisions, held to be ultra vires the Act and struck down as such.
(x) Para 8(1) of ICDS IV is not been shown to be contrary to any judicial precedent. There is also no challenge to Section 36(1) (vii) of the Act. Accordingly, para 8(1) of ICDS IV is held to be not ultra vires the Act. Its validity is upheld.
(xi) ICDS VI which states that marked to market loss/gain in case of foreign currency derivatives held for trading or speculation purposes are not to be allowed, is not in consonance with the ratio laid down by the Supreme Court in Sutlej Cotton Mills Limited v. CIT (supra), in so far as it relates to marked-to-market loss arising out of forward exchange contracts held for trading or speculation purposes. It is, therefore, held to be ultra vires the Act and struck down as such.
(xii) ICDS VII which provides that recognition of Government grants cannot be postponed beyond the date of accrual of receipt, is in conflict with the accrual system of accounting. To that extent it is held to be ultra vires the Act and struck down as such.
(xiii) ICDS VIII pertains to valuation of securities. For those entities not governed by the RBI to whom Part A of ICDS VIII is applicable, the accounting prescribed by the AS has to be followed which is different from the ICDS. In effect, such entities will be required to maintain separate records for income tax purposes for every year since the closing value of the securities would be valued separately for income tax purposes and for accounting purposes. To this extent Part A of ICDS VIII is held to be ultra vires the Act and is struck down as such.
(xiv) Conclusion: To the extent the specific ICDS as noted hereinbefore have been struck down as ultra vires the Act, the impugned Notification Nos. 87 and 88 dated 29th September 2016 and Circular No. 10 of 2017 issued by the CBDT are also held to be ultra vires the Act and struck down as such. (W.P.(C) 5595/2017 & CM APL 23467/2017, dt. 8-11-2017)
The Chamber of Tax Consultants v. UOI ( Delhi)(HC); www.itatonline.org
S.145 : Method of accounting – Cenvat credit – Exclusive method – Amount of unutilised cenvat credit cannot be directly added to closing stock [S. 4]
Dismissing the appeal of the revenue the Court held that the assessee got credit for the excise duty paid on the raw materials purchased by it and utilised in the manufacture of excisable goods. The assessee was adopting the exclusive method, i.e., valuing the raw materials on the purchase price minus the Modvat credit and it was permissible. Merely because the Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw materials, that would not amount to income which was liable to be taxed under the Act. The amount of the unutilised Cenvat credit could not be directly added to the closing stock. (AY. 2008-09)
CIT v. Diamond Dye Chem Ltd. (2017) 396 ITR 536 (Bom.) (HC)
S.147 : Reassessment – After the expiry of four years – reassessment based on the assessment order of subsidiary company – In case of subsidiary company, DRP set aside the assessment order – Held, very basis of reopening of assessment has eroded – Held, reassessment bad in law – DTAA – India-USA. [S. 9, 40(a)(i), Article 12]
Assessee, a US based company, licensed its software products to its Indian subsidiary and received royalty and interest on delayed payment of royalty. A notice u/s. 147 was issued to assessee on ground that assessee had failed to disclose/include to offer for tax an amount either separately or as excess royalty income which had been paid and booked as an expense by subsidiary to assessee on account of ‘purchase of master copy’ in its return of income. High Court held that DRP had deleted said addition u/s. 40(a)(i) in hands of the subsidiary. Accordingly, it was held that the very basis of reopening of assessment having been eroded, reassessment notice and consequent order was to be set aside. (AY. 2007-08)
Oracle Systems Corporation v. Dy. DIT (2017) 248 Taxman 461 (Delhi)(HC)
S.147 : Reassessment – Notice would be without jurisdiction for absence of reason to believe that income had escaped assessment even in case where assessment has been completed earlier by intimation under section 143(1) [S.143(1), 148]
Allowing the petition the Court held that even in cases where no assessment order is passed and assessment is completed by Intimation under Section 143(1) of the Act, the sine qua non to issue a reopening notice is reason to believe that income chargeable to tax has escaped assessment. Accordingly, High Court held that where notice issued under section 148 of the Act gave no reasons to indicate basis of coming to conclusion that share premium was excessive and could be considered as income of the assessee, reopening of the assessment in this regard was improper. Referred, Rajesh Jhaveri Stock Brokers (291 ITR 500( SC) and Zuari Estate Development and Investment Co. Ltd. (373 ITR 661 (SC)
Khubchandani Healthparks (P) Ltd. v. ITO (2017) 154 DTR 93 (Bom.)(HC)
S.147 : Reassessment – Share application money – Notice was quashed and guidelines are laid down and the revenue is directed to adhere to them [Ss. 68, 148]
Allowing the petition the Court held that the assessee has disclosed all relevant facts in the original assessment proceedings. Merely relying on statement that the subscribers are paper companies, without making any independent enquires, the reassessment notice was held to be bad in law. Court also observed that before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments:
(i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the assessee is to be avoided;
(ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for re-opening the assessment – especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof;
(iii) where the reasons make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons;
(iv) the exercise of considering the assessee’s objections to the reopening of assessment is not a mechanical ritual. It is a quasi judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed. (WP. No. 1357/2016, dt. 25-9-2017)( AY. 2008-09)
Sabh Infrastructure Ltd. v. ACIT (Delhi)(HC) www.itatonline.org
S.153A : Assessment – Search –Additions can be made only if incriminating material is found – Additions were rightly deleted by the Tribunal [Ss. 14A, 68,132, 153C]
Dismissing the appeal of the revenue, the Court held that ; argument of the Dept. that the law laid down in Continental Warehousing/All Cargo Global Logistics Ltd (2015 )374 ITR 645 (Bom.) that assessment u/s. 153A can be made only on the basis of incriminating material found in the search and no other issue can be taken is per incuriam in view of ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC) is not correct. Bhola Shankar Cold Storage Pvt Ltd v. JCIT (2004) 270 ITR 487 (Cal.) distinguished Referred CIT v. SKS Ispact & Power Ltd .ITA No. 1874 of 2014 dt. 12-7-2017) (ITA No. 1709 of 2014, dt. 11-9-2017) (AY. 2002-03)
CIT v. Deepak Kumar Agarwal & Ors. (Bom.) (HC); www.itatonline.org
S. 153A : Assessment – Search – Addition can be made only on the basis of material found in the course of search [S. 132]
Dismissing the appeal of the revenue the Court held that addition can be made only on the basis of material found in the course of search. (AY. 2000-01 to 2004-05]
PCIT v. Dipak Jashvantlal Panchal (2017) 397 ITR 153 (Guj.)( HC)
S.153C : Assessment – Income of any other person – Search and seizure – No proceedings can be initiated against a person unless the seized material belongs to that person – Satisfaction recorded must also refer the documents seized. [S. 132]
Dismissing the appeal of the revenue the Court held that proceedings can be initiated against a person only if the seized materials “belongs” to that person. It is not sufficient for the revenue to urge that the seized document “pertains” to the person. Sinhgad Technical Education Society  84 taxmann.com 290 (SC) followed. Court also observed that as far as ITA No. 499/2011 is concerned, the Court finds that there is an additional ground to reject the appeal of the revenue. The satisfaction note recorded by the AO in that case does not even refer to the seized documents.( ITA No. 499 of 2011, dt. 6-9-2017)(AY. 2002-03)
CIT v. Renu Constructions Pvt. Ltd. (Delhi)(HC), www.itatonline.org
CIT v. Ankit Gupta (Delhi)(HC), www.itatonline.org
S.153C : Assessment – Income of any other person – Search – Survey – Merely on the basis of statement in the course of survey addition was held to be not justified, however if the maker of the statement himself reaffirm the statement addition was held to be justified [Ss. 132, 133A]
On appeal to the High Court the assessee contended that the entire assessments were based on statements of a salesman of the assessee recorded under section 133A and that in absence of any corroborative evidence, the assessments were illegal. Dismissing the appeal the Court held that; the statement under section 133A of the salesman of the assessee was recorded during the survey conducted and it is also true that an assessment made entirely relying on such a statement cannot be sustained. However, there is force in the submission of the revenue that the assessments made is not based only on the statement under section 133A. On the other hand, the assessment order itself reveals that the revenue has placed reliance on the proceedings initiated against the appellant for imposition of penalty under section 67 of the Kerala VAT Act (‘KVAT’) based on an inspection held on 17-8-2006. It is seen that the revenue relied on letter dated 18-9-2007 issued by salesman of the assessee to the Assistant Director of Income Tax (Investigation) clarifying his statement under section 133A. This shows that the maker of the statement himself has re-affirmed the statement and nothing has been produced by the assessee to show that the contents of the statement are incorrect. In such a situation, the contention now raised by the assessee is unacceptable and the assessments cannot be held to be illegal. Therefore, the assessment were confirmed.
Kottakkal Wood Complex v. DCIT (2017) 154 DTR 259 (Ker.)(HC)
S.158BFA : Block assessment – Interest – Delay in filing the return was due to delay in furnishing the supply of seized documents – Interest cannot be charged for period of delay attributable to department – Duty of the department to supply the copies of seized documents and allow the inspection as expeditiously as possible. S. 132, 158BC]
Allowing the appeal the Court held that ; a bare reading of section 158BFA(1) did not provide for any discretion to waive or reduce the interest imposable on account of late filing of the return. Section 158BFA(1) provides for grant of copies of the documents seized or inspection of the record as expeditiously as possible, so as to enable the assessee to file his return. That not having been done as was expected under the statute, the assessee could not be made to pay for the negligence of the authorities. The delay between February 26, 2001 and January 3, 2002 attributable to the Department had to be excluded for the purposes of computing the period on which interest could be levied under section 158BFA(1) (BP. 1-4-1990 to 4-8-2000 )
Mahavir Manakchand Bhansali v. CIT (2017) 396 ITR 226 (Bom.)(HC)
S.194LA : Deduction at source – Compensation on acquisition of certain immovable property – “Agriculture” and “Agricultural purposes” – words to be construed as in common parlance [Ss.2(14)(iiia), 195, 197]
Allowing the appeal the Court held that ; the Appellate Tribunal was wrong in holding that the question whether a particular land was agricultural land or not was to be determined with reference to the definition in section 2(14) and not with reference to the tenure of the land as shown in the revenue records. The Income-tax Officer while determining whether the land was agricultural land or not, ought to have considered the words “agriculture” and “agricultural purposes” in the manner in which they were normally understood. Matter was set aside to decide after considering the evidence on record. (AY. 2005-06)
Land Acquisition Collector, Improvement Trust v. Addl. CIT (2017) 396 ITR 410 (P&H) (HC)
S.194LA : Deduction at source – Compensation on acquisition of certain immovable property – No tax should be levied on award except in case of purchase of land by person other than specified person through private negotiations [Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, 46, 96]
Allowing the petition the Court held that ; Section 194LA of the 2013 Act mandated that no Income-tax should be levied on awards made under that Act except under section 194LA of the 2013 Act. Section 194LA dealt with the purchase of land by a person other than a specified person through private negotiations. The benefit of section 194LA of the 2013 Act was not available when the land was purchased through private negotiations by a person other than a specified person under section 46(1) of the 2013 Act. Therefore, in cases other than those covered by section 194LA of the 2013 Act, the levy of Income-tax was barred by section 194LA of the 2013 Act and as a consequence, the deduction or collection under section 194LA of the Act was impermissible. The Department was directed not to deduct tax at source, whenever any compensation was paid for the acquisition of a land under the 2013 Land Acquisition Act, except those covered by section 194LA of the 2013 Act.
P.B. Mangathayar v. UOI (2017) 396 ITR 21 (T&AP) (HC)
C. Nanda Kumar v. UOI (2017) 396 ITR 21 (T&AP) (HC)
S.197 : Deduction at source – Certificate for lower rate – Assessee not having made an application for a certificate under section 197(1) cannot be precluded from contending that it is not bound to deduct tax at source and to pay over same in assessment proceedings – Agricultural land is not defined under Income-tax Act hence has to be considered as they are normally understood [Ss. 2(14) (iii)(a), 194L, 194LA]
Allowing the appeal the Court held that assessee not having made an application for a certificate under section 197(1) cannot be precluded from contending that it is not bound to deduct tax at source and to pay over same in assessment proceedings . Court also held that the, Tribunal proceeded on the incorrect basis that the words ‘agricultural land’ are to be determined with reference to the definition in section 2(14). The Income-tax Act, 1961 does not define the words ‘agricultural land’. Section 2(1A) defines agricultural income. The section uses the word ‘agricultural’. For instance, sub-section 2(1A)(a) defines agricultural income to mean any rent or revenue derived from the land used for agricultural purposes. Sub-section (1A)(b) defines agricultural income to mean any income from such land by agriculture. However, the words ‘agricultural’ and ‘agriculture’ and the words ‘agricultural purposes’ are not defined. The Income-tax Officer indeed had to determine whether the land is agricultural land or not but in doing so he ought to have considered these words in the manner in which they are normally understood.
Land Acquisition Collector, Improvement Trust, Jalandhar v. Addl. CIT (2017) 152 DTR 40 (P&H)(HC)
S.199 : Deduction at source –Credit for tax deducted – Hindu undivided family entitled to benefit of tax deducted at source – Erroneous mention of permanent account number of Karta of family – Revenue has discretion to grant benefit to family [Ss. 201, 264]
Allowing the petition against the order u/s. 264 of the Act there was no dearth of power with the Department to grant credit of tax deducted at source in a genuine case. In the present case, many years had passed since the event. The facts were not seriously in dispute. The assessee had already offered the entire income to tax. The Department had also accepted such declaration and taxed the assessee. In view of such special facts and circumstances, the Department had to give credit of the sum of
₹ 5,42,800/- to the assessee deducted by way of tax at source upon filing an affidavit before the Department that the sum invested by the Reserve Bank of India did not belong to him, the income was also not his and that he had not claimed any credit of the tax deducted at source on such income for the said assessment year (AY. 2012-13)
Naresh Bhavani Shah (HUF) v. CIT (2017) 396 ITR 589 (Guj.)( HC)
S.206AA : Requirement to furnish Permanent Account Number – Limiting correction to four digits of permanent account number of deductee is held to be not justified [S. 200]
Allowing the petition the Court held that ; the revenue should verify the assessee’s claim of actual deduction of tax at the prescribed rate in the case of Star (India) Pvt. Ltd. verify that the permanent account number sought to be corrected by the assessee belonged to that agency and that the tax was actually deposited in the case of such deductee. If these questions were answered in favour of the assessee, the Department should not insist on raising a higher demand from the assessee for failing to deduct tax at source in terms of sub-section (1)of section 206AA.
Purnima Advertising Agency P. Ltd. v. Dy. CIT (2017) 396 ITR 526 / 297 CTR 77 / 249 Taxman 426 (Guj.) (HC)
S.220 : Collection and recovery – Stay – When first appeal is pending the AO cannot ask to pay more than 15% of disputed demand
AO rejected application on ground that at time of submitting stay application, assessee had not deposited 15% of demand as pre-deposit and directed to pay 100% tax in dispute. On writ, allowing the petition the High Court held that the action of the AO was absolutely based on misinterpretation and/or misreading of modified Instructions. High Court observed that Clause-4 provided that the AO may/shall grant stay of demand till disposal of first appeal on payment of 15% of disputed demand. Further, it was held that the impugned decision of rejecting stay application and consequently directing assessee to deposit 100% of disputed demand on ground that assessee had not deposited 15% of disputed demand as a pre-deposit before his application for stay could not be sustained and same deserved to be quashed and setaside.
Jagdish Gandabhai Shah v. P. CIT (2017) 247 Taxman 414 (Guj.)(HC)
S.220 : Collection and recovery – Assessee deemed in default – waiver of interest – Held, since in comparison to profitability of the assessee over years, amount paid by it towards interest u/s. 220(2) was very low, conclusion arrived at by CIT that no ‘genuine hardship’ had been caused to petitioner could not be said to be erroneous – Held, accordingly, CIT rightly dismissed the application for waiver of interest
Assessee was a branch office of a US company and was engaged in contract research activities and cultivation of parent seeds. From year 1993-94 it had been claiming exemption by treating its entire income as agricultural income. AO treated entire income of assessee as ‘business income’ and attributed deemed income from research activity holding assessee to be a Permanent Establishment of its US Company. Assessment was finalised and taxes along with interest were paid by assessee u/s. 220. Thereafter, assessee filed an application before CIT u/s. 220(2A) for waiver of interest levied u/s. 220(2). CIT dismissed application on ground that no genuine hardship had been caused to assessee. High Court held that since in comparison to profitability of assessee over years, amount paid by it towards interest u/s. 220(2) was very low, conclusion arrived at by CIT that no ‘genuine hardship’ had been caused to assessee could not be said to be erroneous. (AY. 1997-98)
Pioneer Overseas Corporation USA (India Branch) v. CIT (IT) (2017) 153 DTR 337 / 248 Taxman 186 (Delhi)(HC)
S.226 : Collection and recovery –Modes of recovery – Requirement of garnishee proceedings is that only a copy of notice should be forwarded to assessee and need not be served on assessee in advance or simultaneously [Ss. 156, 220, 226(3)]
Dismissing the petition the Court held that requirement under section 226(3)(iii) was only that a copy of the notice should be “forwarded to the assessee” and not that a copy should be served on the assessee in advance or simultaneously. Hence, there was no illegality committed by the Department in not issuing to the assessee a notice under section 226(3)(iii)of the Act simultaneously with or prior to the notice issued to its bank under section 226(3)(i) of the Act for recovery of the tax demand from its account (AY. 2014-15)
GECAS Services India P. Ltd. v. ITO (2017) 396 ITR 305/ 84 taxmann.com 21 (Delhi)(HC)
S.237 : Refunds – If the assessee is entitled for any other benefits the same must be granted though he has not claimed. Similarly the assessee is entitled to have refund of excess amount as State could not recover tax more than what was due to it
Allowing the petition the Court held that if assessee is entitled for other benefits which he has not claimed, the same be granted to him i.e., after the proceedings if it found that the assessee is entitled for refund, the same should be refunded as the State cannot recover the tax more than what is due to it.
Kalindee Rail Nirman (Engineers) Ltd. v. CIT (2017) 150 DTR 239 (Raj.)(HC)
S.253 : Appellate Tribunal – Delay of 1902 days – Non-advice on the part of professional and ignorance of law was held to be a reasonable cause hence the delay was condoned. Matter was remanded to Tribunal [S. 12AA]
Allowing the appeal the Court held that; it is only the reason of either non-advise on the part of the professional, who has been engaged by the assessee or the ignorance of law by the assessee itself. In view of these reasons, the impugned order of the Tribunal rejecting the appeal of the assessee mainly on the ground of delay, the High Court remitted the matter back to the ITAT for deciding the issue on merits.
Hosanna Ministries v. ITO (2017) 152 DTR 8 (Mad.)(HC)
S.254(1) : Appellate Tribunal – Delay of 2984 days in filing the appeal due to wrong advice of Chartered Accountant was condoned – Cost was imposed of
₹ 5,000. Strictures by ITAT against ICAI deprecated [S.80-O]
Allowing the petition, the Court condoned the delay of 2984 days in filing appeal before the Tribunal due to wrong advice of the Chartered Accountant. Court also imposed cost of
₹ 5,000. Court also observed that it is very unfortunate that the Tribunal out of sheer desperation and frustration and agitated by the fact that the revenue is not opposing the request for condonation of delay blamed the assessee’s chartered accountant and the ICAI on how they should conduct themselves. The Tribunal completely misdirected itself by taking irrelevant factors into account. Delay of 2984 days in filing the appeal caused by wrong advice of a professional is capable of condonation. However, even if the assessee has acted bona fide, he can be held liable for payment of costs to balance rights and equities. Court also observed that ; to render substantial justice and not to enrich the revenue that the costs have been imposed. It is not, therefore, a case where the State has been allowed to retain any benefit or has been benefitted by any directions. It is the Court which in its discretion has imposed this condition. We do not find any basis to alter it. The request in that behalf is refused. (ITA No. 493 of 2015, dt. 19-9-2017)(AY. 1996-97)
Vijay Vishin Meghani v. DCIT ( Bom)(HC), www.itatonline.org
S.254(1) : Income Tax Appellate Tribunal – ITAT had not correctly appreciated the facts of the assessee’s case, the order of the ITAT was quashed and matter sent back for fresh adjudication [S. 12A]
Assessee’s application for registration u/s. 12A was dismissed and registration refused by the Commissioner against which an appeal was preferred to the ITAT. At the time of hearing, ITAT clubbed other matters on this issue and ultimately held in favour of the assessee. On appeal by the revenue, allowing the appeal the Court held that the ITAT had wrongly considered the factual aspects and wrongly allowed the appeal. High Court held that there was an application for renewal of the registration was factually incorrect as also the fact that previously the registration was granted under Section 12AA. High Court quashed the ITAT’s order and remanded the matter back for fresh consideration.
CIT v. Bharadwaj Sewa Trust (2017) 295 CTR 566/ 152 DTR 1 (Jharkhand)(HC)
S.254(1) : Income tax Appellate Tribunal – Reassessment – Jurisdictional issue – Even in ex-parte order the Tribunal ought to have called the records and decided the issue. High court set aside order of ITAT as ITAT failed to decide jurisdictional issue [S. 147, 148]
Assessee challenged initiation of re-assessment proceedings on account of lack of jurisdiction. CIT(A) decided issue of initiation of re-assessment proceeding against assessee and ITAT proceeded to decide appeals and cross objections ex-parte against assessee. On appeal, the High Court held that ITAT had clearly gone completely wrong in observing that ground as to validity of initiation of reassessment proceedings did not arise from order of CIT(A). As for material and evidence having allegedly not produced by assessee, High Court held that it was for the ITAT to call for such record and examine whether initiation of reassessment proceedings was valid or not. As ITAT completely failed to decide jurisdictional issue that went to root of matter and accordingly, the High Court set aside the ITAT order.
Javed Akhtar (Dr.) v. CIT (2017) 150 DTR 288 (All.)(HC)
S.254(1) : Appellate Tribunal – Additional evidence – Tribunal was not justified in rejection of the revenue records as additional evidence. [Ss. 2(14)(iii)(a), 197]
The decision of the Tribunal, therefore, rejecting the application for admission of additional evidence in the form of revenue records is incorrect and based on incorrect findings of law and of fact. Even assuming that the revenue records do not conclusively establish the assessee’s case that the land was agricultural land, it cannot by any stretch of imagination be held that they are irrelevant. Accordingly, the assessee is entitled to establish in the assessment proceedings whether the land is agricultural land or not.
Land Acquisition Collector, Improvement Trust, Jalandhar v. Addl. CIT (2017) 152 DTR 40 (P&H)(HC)
S.254(1) : Appellate Tribunal – Order was set aside as the Tribunal has not passed a speaking order [Ss. 40(a)(ia), 40(ba), 194C]
Allowing the appeal of the revenue the Court expressed the displeasure and unhappiness at the manner in which the Tribunal approached the matter in so far as the applicability of s. 40(ba) is concerned. Tribunal cautioned that it should not use abbreviations in the order without indicating what the terms stand for as it causes confusion – Matter was set aside to Tribunal. (ITA No. 1826 of 2014, dt. 4-9-2017) (AY. 2008-09)
CIT v. ITD CEM India JV(Bom)(HC), www.itatonline.org
S.254(1) : Appellate Tribunal – Non application of mind – Remanding the matter to AO without any discussion is held to be not proper – The Tribunal failed to perform its duty of rendering a complete decision. It is obliged in law to examine the matter and reappraise and reappreciate all the factual materials
Allowing the appeal of the asseeee the Court stated that it is “most unhappy” with the manner in which the Tribunal has decided the appeal. The Tribunal remanded the matter to the AO without any discussion as to why the order of the CIT(A) is perverse or is contrary to law. It also did not point out infirmities or errors of fact and law in the order of the CIT(A). The Tribunal failed to perform its duty of rendering a complete decision. It is obliged in law to examine the matter and reappraise and reappreciate all the factual materials. (ITA No. 53 of 2016, dt. 11-9-2017)
Thyrocare Technologies limited v. ITO (TDS) (Bom.)(HC), www.itatonline.org
S.254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – Limitation period: The amendment to S. 254(2) w.e.f. 1-6-2016 to curtail the period available to file rectification applications from four years to six months cannot apply to appellate orders passed prior to that date because that would take away a vested right [S. 254(1)]
Allowing the petition of the assessee the Court held that the amendment to S. 254(2) w.e.f. 1-6-2016 to curtail the period available to file rectification applications from four years to six months cannot apply to appellate orders passed prior to that date because that would take away a vested right. The amendment has been made effective virtually in case of assessee with retrospective effect though the amendment does not show that it is applicable with retrospective effect, however, the existing right has been extinguished with retrospective effect in case of the assessee. In the considered opinion of this Court, the legislature should have granted some time to the assessees who could have filed an appeal within a period of four years and the same has not been done till the amendment came into force extinguishing the right to file an appeal. In the considered opinion of this Court, application preferred by the assessee should not have been dismissed by the Tribunal on account of the amendment which has reduced the period of limitation of four years to six months. Resultantly, the impugned order passed by the respondent on 23-12-2016 is hereby quashed and the writ petition stands allowed. The Income Tax Appellate Tribunal is directed to decide the application preferred under Section 254(2) on merits within a period of three months from the date of receipt of certified copy of this order. (WP No. 4144/2017, dt. 9-10-2017)(AY. 2010-11)
District Central Co-op. Bank Ltd. v. UOI (MP)(HC), www.itatonline.org
S.260A : Appeal – High Court –Delay of 1128 daysin filing the appeal was not condoned and severe strictures passed against the department for filing a ‘patently false’ affidavit
Dismissing the notice of motion of revenue for condoning the dely of 1128 days, the Honourable Court has passed severe strictures against the Department for filing a ‘patently false’ affidavit with regard to the failure to remove office objections. The cause shown is not sufficient and lacks in bona fides. It is a case of gross negligence and utter callousness on the part of the revenue/Department. Tendency of the revenue to either blame its advocate or the procedural rules for the dismissal of their Appeals deprecated. (NM. No.1672 of 2017 in ITA No. 448 of 2014, dt. 28-8-2017.)
CIT v. Parle Bisleri Ltd. (Bom.)(HC); www.itatonline.org
S.263 : Commissioner – Revision of order prejudicial to the interest of revenue – The failure to issue notice on any particular issue does not vitiate the exercise of power as long as the assessee is heard and given opportunity. The CIT has power to consider all aspects which were the subject matter of the AO’s order, if in his opinion, they are erroneous, despite the assessee’s appeal on that or some other aspect
Dismissing the appeal the Court held that ; the failure to issue notice on any particular issue does not vitiate the exercise of power u/s. 263, as long as the assessee is heard and given opportunity. The lack of opportunity at the revisional stage does not vitiate the entire order, or the proceedings. It is a curable defect. The CIT has power to consider all aspects which were the subject matter of the AO’s order, if in his opinion, they are erroneous, despite the assessee’s appeal on that or some other aspect. (ITA 387/2017, dt. 8-11-2017) (AY. 2010-11)
BSEC Rajdhani Power Ltd. v. PCIT( Delhi)(HC), www. itatonline.org
S.263 : Commissioner – Revision of orders prejudicial to revenue – Lack of inquiry v. Inadequate inquiry – Revision on the ground that the AO did not conduct a detailed inquiry on account of paucity of time is unfair to the assessee and invalid [S. 153A]
Dismissing the appeal of the revenue, the Court held that revision on the ground that the AO did not conduct a detailed inquiry on account of paucity of time is unfair to the assessee and invalid. CIT v. Amitabh Bachhan (2016) 384 ITR 200 (SC) & CIT v. Maithan International (2015) 375 ITR 123 (Cal) distinguished. (ITA No. 637/2017, dt. 21-8-2017) (AYs. 2008-09 to 2011-12 )
PCIT v. Mera Baba Reality Associates Pvt. Ltd. (Dehi)(HC); www.itatonline.org
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Sending entire matter back to Assessing Officer without making any inquiry is held to be bad in law [S. 32]
Dismissing the appeal of the revenue, the Court held that for the purposes of exercising jurisdiction u/s. 263, the conclusion of the CIT that the order of the AO is erroneous and prejudicial to the interests of the revenue has to be preceded by some minimal inquiry. If the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. The second option available u/s. 263 (1) of sending the entire matter back to the AO for a fresh assessment can be exercised by the PCIT only after he undertakes an inquiry himself and not
otherwise. (ITA No. 705/2017. dt. 5-9-2017)(AY. 2011-12)
PCIT v. Delhi Airport Metro Express Pvt. Ltd. (Delhi)(HC); www.itatonline.org
S.271(1)(c) : Penalty – Concealment – Rectification of declaration was made on the advice of chartered Accountant – Deletion of penalty was held to be justified
Dismissing the appeal of the revenue the Court held that declaration was made by the assessee under the advice of the chartered accountant and subsequently it was rectified. Therefore, there was no intention on the part of assessee to commit any wilful concealment .
ITO v. Silk City Petrofiles Co. Ltd. (2017) 396 ITR 191 (Guj.) (HC)
S.271(1)(c) : Penalty – Concealment – Assessee cannot be said to have furnished incorrect particulars in the return filed in search proceedings where a revised computation of income was filed after ITAT’s order in the course of parallel reopened assessments [S.153A]
Assessee filed return of income for AYs. 2002-03 and 2003-04 declaring a loss. The assessments were reopened and a higher figure was assessed to tax. The assessee had filed appeals against the order passed in the reassessment proceedings. While the assessee’s appeals were pending before the ITAT, search proceedings were initiated. In response to the notice issued u/s. 153A, assessee filed the same return which it filed originally. After the ITAT held that the assessee should estimate 5% of its recoveries as profit, the assessee filed a revised computation of income in the search proceedings and the assessment was completed accepting the same. Thereafter, notices u/s. 271(1)(c) were issued and it was held that the assessee had failed to furnish true and correct particulars of income during the search proceedings. HC held that penalty could not be levied on the assessee as the ITAT had passed its order after the return of income was furnished in the section 153A proceedings.
CIT v. Juhu Construction Co. (2017) 151 DTR 157/295 CTR 316 (Bom.) (HC)
S.271(1)(c) : Penalty – Concealment – Book profits – Penalty cannot be levied for concealment in normal assessment [S. 115JB]
Dismissing the appeal of the revenue the Court held that since at the stage when the Assessing Officer sought to assume jurisdiction to levy penalty for concealment of income, the assessment was completed under section 115JB of the Act, and there was no concealment of any material particulars in respect of that part of the return, penalty proceedings could not have been initiated on the basis of normal computation made later. No question of law arose.
PCIT v. Multiplex Capital Ltd. (2017) 396 ITR 62 (Delhi)( HC)
Editorial: SLP of revenue is dismissed, PCIT v. Multiplex Capital Ltd. (2017) 394 ITR 5 (St.)
S.271AAA : Penalty – Search initiated on or after 1st June, 2007 – No penalty can be levied in respect of undisclosed income found during a search if the AO did not put a specific query to the assessee by drawing his attention to s. 271AAA and asking him to specify the manner in which the undisclosed income, surrendered during the course of search, had been derived [S. 132]
Dismissing the appeal of the revenue the Court held that the CIT(A) noted that no specific query had been put to the assessee by drawing his attention to Section 271AAA of the Act asking him to specify the manner in which the undisclosed income, surrendered during the course of search, had been derived. The CIT(A), therefore, relying on the decisions of this Court held that the jurisdictional requirement of Section 271AAA was not met. The above view has been concurred with by the ITAT. In the facts and circumstances of the case, the Court is of the view that the concurrent decision of the CIT(A) and the ITAT represent a plausible view which cannot be said to be perverse (ITA No. 400/2007, dt. 18-7-2017) (AY. 2010-11)
PCIT v. Emirates Tecnologies Pvt. Ltd. (Delhi) (HC). www.itatonline.org
Income Declaration Scheme, 2016 Finance Act, 2016
S.183 : Declaration of undisclosed income – Petitioner failed to pay 25 per cent of tax payable on undisclosed income declared under Income Declaration Scheme, 2016 before due date – Assessee filed a petition to direct revenue to accept the said payment after the due date – Held – no provision under IDS which would permit revenue to accept payment after specified date [S. 186]
Assessee filed a declaration under Income Declaration Scheme, 2016 declaring certain undisclosed income. He, however, failed to pay 25 per cent of tax payable on or before due date. Assessee’s grievance was that he failed to deposit tax payable in view of demonetisation of
₹ 500 and ₹ 1,000 currency notes. Therefore, the petition was filed before the Court to direct the Department to accept the payment after the due date. The High Court held that since there was no provision under IDS which would permit revenue to accept payment after specified date, it would not direct revenue to accept tax payable after specified date to make payment. (AY. 2014-15)
Nandu Atmaram Wajekar v. UOI (2017) 247 Taxman 145 / 295 CTR 212 / 151 DTR 121 (Bom.)(HC)