80. S.2(1A) : Agricultural income-Mushroom is not a ‘vegetable’, ‘plant’, ‘fruit’ or ‘animal’ but is a ‘fungus’. Anything which is produced by performing basic operations on the soil is an “agricultural product” and the income therefrom is “agricultural income”. The nature of the product and the fact that it is not a ‘plant’, ‘flower’, ‘vegetable’ or ‘fruit’ is irrelevant. The only relevant aspect is whether the production is by performing some basic operations on the soil. Accordingly the income from production and sale of mushrooms can be termed as ‘agricultural’ income. [S.10(1)]

    Tribunal held that mushroom is not a ‘vegetable’, ‘plant’, ‘fruit’ or ‘animal’ but is a ‘fungus’. Anything which is produced by performing basic operations on the soil is an “agricultural product” and the income therefrom is “agricultural income”. The nature of the product and the fact that it is not a ‘plant’, ‘flower’, ‘vegetable’ or ‘fruit’ is irrelevant. The only relevant aspect is whether the production is by performing some basic operations on the soil. Accordingly the income from production and sale of mushrooms can be termed as ‘agricultural’ income. (ITA Nos. 1015 to 1018/Hyd/2015 C.O. Nos. 53 to 56/Hyd/2015, dt. 9-7-2018)(AY. 2008-09 to 2012-13)

    DCIT v. Inventaa Industries Private Limited (2018) 95 taxman.com 162 (Hyd.)(Trib.)(SB), www.itatonline.org

81. S.2(22)(e): Deemed dividend – Both the registered and beneficial shareholders are two individuals and not the assessee company – Addition cannot be made as deemed dividend. The argument of the Dept., based on Gopal and Sons (HUF) v. CIT (2017) 399 ITR 1(SC) that even though the assessee-recipient of money is neither the registered nor the beneficial shareholder of the payer company, the money should be assessed as “deemed dividend” is not correct

    Dismissing the appeal of the revenue the Tribunal held that the question of law considered by the Supreme Court in the case of Gopal and Sons (HUF) v. CIT (2017) 399 ITR 1(SC) was different from the issue which arises in the present matter. The question of law which the Supreme Court was called upon to consider was whether loans and advances received by a HUF could be deemed as a dividend within the meaning of S. 2(22)(e) of the Act. The assessee in that case was the HUF and the payment in question was made to the HUF. The shares were held by the Karta of the HUF. It is in this context that the Supreme Court came to the conclusion that HUF was the beneficial shareholder. In the instant case, however, both the registered and beneficial shareholders are two individuals and not the assessee-company. Therefore, in our view, the judgment of the Supreme Court does not rule on the issue which has come up for consideration in the instant matter. (ITA No. 1003/MUM/2017, dt. 20-6-2018)(AY. 2010-11)

    DCIT v. Gilbarco Veeder Root India Pvt. Ltd. (Mum)(Trib.), www.itatonline.org

82. S.4 – Charge of Income-tax – Subsidy received from Government for setting up of an industry in the backward area was to be treated as a capital receipt

    On revenue’s appeal, relying on the Supreme Court’s decision in the case of Sahney Steel and Press Works v. CIT (1997) 228 ITR 253 (SC) and CIT v. Ponni Sugar & Chemicals Ltd. (2008) 306 ITR 392 (SC), the Tribunal held that ‘purpose test’ should be applied for determining the character of the subsidy. Since the subsidy in the present case was received by the assessee for setting up of an industry in the backward area of West Bengal, it was held that the CIT(A) rightly treated the same as capital in nature. (ITA No. 3002/Del/2011). (AY. 2005-06)

    ACIT v. Pasadensa Foods Ltd. (2018) 163 DTR 243 (Delhi)( Trib.)

83. S.4 : Charge of income-tax –Personal effects – Sale of painting received by gift from father is held to be capital receipts – Amendment by Finance Act 2007 w.e.f. 1-4-2008 is prospective in nature [Ss.2(14), 28(i)]

    AO treated the sale of painting which was received by father late Mr. M.F. Husain as business income instead of capital receipts. On appeal the Tribunal held that the painting received by the assessee from his late father as gift is a personal effect and not liable to tax. Amendment by Finance Act, 2007 w.e.f. 1-4 -2008 is prospective in nature. (ITA. No 4320/Mum/2016 “D” dt. 11-5-2018)(AY. 2006-07)

    Owais M. Husain v ITO (Mum.) (Trib.)

84. S.5 : Scope of total income – Non-Resident – Alleged deposit in HSBC foreign bank Account at Geneva – A non-resident having money in a foreign country cannot be taxed in India if such money has neither been received or deemed to be received, nor has it accrued or arisen to him or deemed to accrue or arise to him in India – Addition cannot be made for the alleged deposit in foreign Bank accounts [Ss. 5(2), 6, 9]

    Dismissing the appeal of the revenue the Tribunal held that the assessee being a non -resident, having money in a foreign country cannot be called upon to pay income tax on that money in India unless it satisfies the tests of taxability on non-resident under the provisions of the Act, which in the instant case is not getting satisfied in the case of the assessee. Thus the bank account of HSBC Bank, Geneva is outside the purview of this Act. A non-resident having money in a foreign country cannot be taxed in India if such money has neither been received or deemed to be received, nor has it accrued or arisen to him or deemed to accrue or arise to him in India. Accordingly addition cannot be made for the alleged deposit in foreign Bank accounts. (ITA No. 4751/Mum/2016/ 4752/Mum/2016 dt. 19-6-2018) (AYs. 2006-07, 2007-08)

    Dy. CIT v. Dipendu Bapalal Shah (2018) 95 taxman.com 171 (Mum.) (Trib.) www.itatonline.org

85. S.5 : Scope of total income – Non-resident foreign national – Alleged deposits in HSBC Foreign Bank account at Geneva – Deletion of the addition by the CIT(A) is held to be not justified – AO is directed to make further investigation to find out whether the source of the deposits in foreign account originated from India [S.5(2), 6, 9]

    AO made an addition on the ground that the assessee could not prove with documentary evidences that the deposits are not from India. CIT(A) deleted the addition on the ground that it is a foreign bank account of a non-resident and the deposits therein cannot be added in the hands of the assessee individual. On appeal by the revenue, the Tribunal held that the assessee has used his invalid Indian passport which he should have surrendered to the Indian authorities in opening a bank account in Geneva. Hence, the intent of the assessee is not above board. Further it is settled law from the Hon’ble Apex Court in Kapurchand Shrimal (1981) 131 ITR 451 (SC) that the revenue authorities are entitled to look into the surrounding circumstances and economic reliability. The Assessing Officer is directed to make further investigation into the source of the deposits in the bank accounts. Accordingly, the matter was set aside to the Assessing Officer. (ITA No. 5889/Mum/2016 dt. 1-6-2018) (AY. 2003-04),

    DCIT v. Rahul Rajnikant Parikh & Ors. (Mum.) (Trib.), www.itatonline.org

86. S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – Subsidiary of a foreign company constitutes “business connection” and/ or “fixed Permanent Establishment” and/or “Dependent Agent Permanent Establishment” of assessee in India – Held No. (b) whether any attributes of profits on account of signing, network planning and negotiation of off-shore supply contracts in India could be attributed to such business connection/ permanent establishment – Held No and (c) whether notional interest on delayed consideration of supply of equipment and licensing of software taxable in the hands of assessee as interest from vendor financing – Held No – DTAA – India – Finland – Majoriy view 
    is in favour of the assessee. 
    [Arts. 5, 7]

    These appeals pertaining to Assessment Years 1997-98 & 1998-99 have been taken up for hearing by this Special Bench in pursuance of direction given by the Hon’ble Delhi High Court vide judgment and order dated 
    7th September, 2012, passed in ITA Nos. 395 of 2005; 1137 & 1138 of 2006, 503 and 1324 of 2007; and 30 of 2008. The Hon’ble High Court has remanded certain issues back to the Tribunal to decide afresh as to, firstly, whether the Indian subsidiary of the assessee would provide business connection or a permanent establishment in India; secondly, even if so, then is there any attributes of profits on account of assigning, networking planning and negotiation of off-shore contract supply in India and if yes then to what extent and basis thereof; and lastly, the question of notional interest on delayed consideration received for supply of equipment and software, is taxable in the hands of the assessee as interest from vendor financing.

    All the issues referred by the High Court is answered in favour of the assessee by majority view. i.e., Merely having a subsidiary company or if foreign enterprise has a control on that company which carries out the business in that country (India) will not itself constitute a PE. Nothing is taxable on account of signing, network planning and negotiation of off- shore supply contracts, therefore, there is no question of any attribution of income on account of these activities which are purely related to supply contracts. Accordingly, the issue of attribution which has been remanded back by the Hon’ble High Court has become purely academic. After considering the relevant finding and rival contentions, we find that, it has not been brought on record that in any of the contract the assessee had charged any interest on delayed payment or providing any credit facilities to its customers or any customer has paid any such amount for each day elapsed from the due date to the actual payment. Once none of the parties have either acknowledged the debt or any corresponding liability of the other party to pay, then it cannot be held that any income should be taxed on notional basis which has neither accrued nor received by the assessee.

    Minority view, is the Tribunal held that the assessee company had a PE in India, by way of the premises and existence of its Indian subsidiary Nokia India Pvt. Ltd., and that the profit attributable to the specified operations of this PE are 3.75% of total sales of the equipment in India. In the result, while I uphold the action of the CIT(A) in principle, I marginally reduce the quantum of profits attributable to the PE. As against profit @ 5% of sales held to be attributable to the Indian PE, I hold the profit on 3.75% of sales to be attributable to PE in respect of the specified activities. In the result, in my considered view, the plea of the assessee against the existence of business connection and the existence of permanent establishment is to be rejected, and plea of the assessee on the attribution of profit is to be partly accepted in the terms indicated above. To this extent, even as I humbly bow to the majority so far results of these appeals are concerned, I disassociate myself with the order as finalised by the majority. Save on the above points, I am in considered agreement with the conclusions arrived at in the lead order and I respectfully endorse the same. (I.TA. Nos.1963 & 1964/DEL/2001 dt. 5th June, 2018 (AYs. 1997-98, 
    1998 -99)

    Nokia Networks OY, v. JCIT (2018) 65 ITR 23/194 TTJ 137/94 taxman.com 111 (SB) (Delhi (Trib.) www.itatonline.org

87. S.10(10A) : Commutation of pension – Employees of statutory corporations cannot be regarded as employees of State or Central Government and exemption is not available, however as the assessee was under bona fide belief and discharged its obligation u/s. 192, proceedings u/s. 201(1), 201(IA) were quashed [Ss.192, 201(1), 201(IA)]

    Tribunal held that assessee being a statutory corporation its employees could not be regarded as State or Central Government employees and, therefore, exemption under S.10(10AA)(i) was not available and assessee was liable to deduct tax at source. However, since the assessee was under bona fide belief that its employees were to be regarded as employees of State Government and that its employees were entitled to exemption of entire sum of unutilised leave encashment under S. 10(10AA)(i), assessee had discharged its obligation under S. 192, proceedings under S. 201(1) and 201(1A) were to be quashed. (AYs. 2013-2014-15 )

    KPTCL v. ITO (2018) 170 ITD 587 (Bang.) (Trib.)

88. S.10A : Free trade zone – Exemption – Period of ten consecutive years to be reckoned from year of commencement of manufacture and not from incorporation

    The Appellate Tribunal held that though the assessee came into existence on August 4, 1998, the assessee ventured into to the operation of manufacturing software from assessment year 2000-01 only. Hence, the assessee is eligible for exemption for a period of ten consecutive assessment years beginning with the assessment year 2000-01 to the Assessment Year 2009-10. (A.Y. 2009-10)

    Aspire Systems (I) P. Ltd. v. Dy. CIT (2018) 62 ITR 656 (Chennai)(Trib.)

89. S.12AA : Procedure for registration – Trust or institution – Filing or non-filing of return of income or payment of tax has nothing to do with genuineness of activities of an institution – Benefit of S.11 is subject to application of income and income can also be taxed u/s. 13 if there is violation – CIT (E) is directed to grant registration to the 
    assessee forth with [Ss. 2(15) 11, 13(1)(b)]

    Allowing the appeal of the assessee the Tribunal held that filing or non-filing of return of income or payment of tax has nothing to do with genuineness of activities of an institution. Benefit of S.11 is subject to application of income and income can also be taxed u/s. 13 if there is violation – CIT(E) is directed to grant registration to the assessee forth with.

    B.S.A. College. v. CIT(E) (2018) 170 ITD 485 (Agra) (Trib.)

90. S.12AA : Procedure for registration – Trust or institution – Mainly on ground that it was charging hefty fee from students registration cannot be refused as society is providing free education to needy students and free medical aid to needy patients [S.2(15)]

    Allowing the appeal of the assessee the Tribunal held that rejection of application for registration was not justified; mainly on ground that it was charging hefty fee from students registration cannot be refused as society is providing free education to needy students and free medical aid to needy patients.

    B. B. Educational Society v. CIT (2018) 170 ITD 362 (Delhi) (Trib.)

91. S.14A : Disallowance of expenditure – Exempt income – assessee’s share capital along with reserve and surplus is many times higher than the amount invested in shares – No disallowance can be made [8D(2)(ii)]

    It has been held by the Appellate Tribunal that if an assessee has interest free funds as well as interest bearing funds at its disposal, then the presumption would be that investments were made from interest free funds at its disposal. Since the assessee’s share capital along with reserve and surplus is far in excess of its investment in shares, etc. yielding exempt income, nod disallowance can be made under section 14A r/w r. 8D(2)(ii) of the Income-tax Rules. (A.Y. 2008-09)

    DLF Commercial Developers Ltd. v. Dy. CIT (2018) 164 DTR 207 (Delhi)(Trib.)

92. S.23 : Income from house property – Annual value – Deemed rent to be computed on the basis of Municipal rateable value and not on the basis of market rent [S.22]

    AO estimated the rent based on the inspectors report which was based on the local enquiry conducted in the surrounding areas of the building situated. On appeal Tribunal following the ratio in CIT v. Tip Top Typography (2014) 368 ITR 330 (Bom.) (HC) directed the AO to compute the deemed rent as per Municipal rateable value (ITA. No 4320/Mum/2016 “D” dt. 11-5-2018)(AY. 2006-07)

    Owais M.Husain v. ITO (Mum.) (Trib.)

93. S.23 : Income from house property – Annual value – Stock-in-trade – Unsold flats which are held by a builder as stock in trade cannot be brought to tax under the head ‘income from house property’. They are only assessable as business profits when sold. [S.22]

    Dismissing the appeal of the revenue the Tribunal held that unsold flats which are held by a builder as stock-in-trade cannot be brought to tax under the head ‘income from house property’. They are only assessable as business profits when sold. (Followed Runwal Constructions v. ACIT ITA No. 5408/5409 /Mum/2016 dt. 22-2-2018) (ITA No.6037/Mum/2016, dt. 27-6-2018)( AY. 2012-13)

    ITO v. Arihant Estate Pvt. Ltd. (Mum.)(Trib.), www.itatonline. Org

94. S.23 : Income from house property – Annual value – Though property remained vacant during relevant previous year benefit of S. 23(1)(c) is available [S.23(1) (c)]

    Dismissing the appeal of the revenue the Tribunal held that; in order to avail benefit of S. 23(1) (c) it is not necessary that property should have been actually let in relevant previous year or during any time prior to relevant previous year, therefore, where properties remained vacant during relevant previous year, the assessee could still avail deduction under S 23(1)(c) of the Act. (AYs. 2008-09 to 2013-14)

    ITO v. Metaoxide (P.) Ltd. (2018) 170 ITD 235 (Mum.) (Trib.)

95. S.23 : Income from house property – Annual value – The assessee has the option to claim as self occupied property which is more beneficial to him [S.22]

    Allowing the appeal of the assessee the Tribunal held that, the Income-tax Act, nowhere states that option of selecting a self occupied property, once exercised, cannot be changed. Accordingly the tax payer can change his selction during assessment proceedings. (ITA No.5616/Mum/2015 dt. 23-5-2018, “ F”)(AY. 2011-12)

    Venkatavarthan N. Iyengar v. ACIT (Mum) (Trib)

96. S.28(i) : Where in terms of memorandum of association, main object of assessee company was to acquire properties and to further let out such properties, income earned from such letting out was to be brought to tax as ‘business income’ and not as ‘income from house property’

    Assessee had acquired a shopping area and after acquiring the same, assessee further let out different portion of shopping space to different persons. This letting out income was shown by the assessee as “contribution from shops” and the amount paid as rent for acquiring the property was shown as “licence fees and other charges”. The assessee claimed said income as income from business or profession.

    The AO held that since the assessee was having the irrevocable right for 50 years over the shopping space, in view of provisions of section 27(iiib) the assessee was the owner of the building or shopping space. Therefore, the income derived from the said building or shopping space were to be taxed under the head Income from House Property. On appeal, CIT(A) upheld the order of AO.

    Aggrieved, the assessee filed an appeal before the Tribunal.

    The Hon’ble Tribunal held that assessee’s main object as stated in its Memorandum of Association was to acquire on licence or by purchase, lease, exchange, hire or otherwise lands and property of any tenure, or premises in any part of India and to license or sub-license or lease or sub-lease or let, such lands or property or premises or any part thereof, clearly spells out that the assessee’s main business is to carry out systematic and regular activity in the nature of business of letting out property. Section 27(iiib) read with section 269UA(f) of the Act is not applicable in the instant case as the agreement is only for use of property and not for the transfer of the same. Since the company is neither the owner nor the deemed owner in terms of section 27(iiib), the ‘Contribution from Shops’ cannot be assessed under the head ‘Income from House Property’.

    Tribunal relied on the decisions in case of Chennai Properties & Investments Ltd. (373 ITR 673) (SC), Rayala Corpn. (P.) Ltd. (386 ITR 500)(SC) and Bombay Plaza (P.) Ltd. (161 ITD 552) (Kol) and upheld the assessee’s claim that the income from granting premises on sub-license was to be assessed under the head income from business.

    Oberoi Investments (P) Ltd. v. ACIT ( 2018) 161 DTR 257 (Kol.) (Trib.)

97. S.28(i) : Business loss – Forfeiture of security – Capital or revenue – Encashment of bank guarantee for failure to construct bus shelter with in time prescribed in the agreement is allowable as business loss

    Assessee entered into an agreement with Delhi Transport Corporation for setting up 400 bus queue shelters under build operate and transfer basis. Assessee was to construct above shelters and operate them for 10 years and thereafter they were to be transferred to Delhi Transport Corporation. Assessee was required to pay Delhi Transport Corporation monthly revenue of ` 4.09 crore in respect of fees for 400 bus shelters and it was free to earn revenue through advertisement etc. to be displayed on those bus shelters. In terms of assessment, assessee was to give a performance security to Delhi Transport Corporation . Since assessee failed to construct bus shelters within time prescribed in agreement, DTC encashed amount of performance security. Assessee debited said amount in profit and loss account and claimed deduction for same. Assessing Officer rejected assessee’s claim taking a view that loss was of capital nature. On appeal Tribunal held that, the assessee was engaged in business of constructing bus shelters and loss of bank/performance guarantee occurred during course of business of assessee, it could not be regarded as capital expenditure when assessee failed to create requisite bus shelters within prescribed time period. Therefore, impugned order was to be set aside and assessee’s claim for deduction was to be allowed. (AY. 2009-10)

    Green Delhi BQS Ltd. v. ACIT (2018) 170 ITD 738 (Delhi) (Trib.)

98. S.28(i) : Business loss – Derivatives – loss at end of year on mark-to-market basis could not be disallowed on ground that same was contingent in nature [S.37(1)]

    Tribunal held that assessee, carrying on trading activities in stock and commodities and held derivatives as stock-in-trade, its claim for loss at end of year on mark-to-market basis could not be disallowed on ground that same was contingent in nature. (AY. 2011-12)

    Edel Commodities Ltd. v. DCIT ( 2018) 170 ITD 402 (Mum.) (Trib.)

99. S.32 : Depreciation – Goodwill – Intangible asset – Goodwill will fall under the expression ‘or any other business or commercial rights of similar nature’ hence depreciation is available on genuine goodwill. Whether there is transfer of goodwill and valuation done by the assessee is erroneous has to be decided by Division Bench, accordingly the matter is sent back to Division Bench

    Special bench of the ITAT held that, goodwill will fall under the expression ‘or any other business or commercial rights of similar nature’ hence depreciation is available on genuine goodwill. Followed CIT v. Smifs Securities Ltd. (2012) 348 ITR 302 (SC). However the question whether when a firm has been succeeded by a company and net assets of the firm have vested in the company, there is any transfer of goodwill in the real sense and whether the valuation of goodwill done by the assessee is erroneous has to be decided by the Division Bench. Accordingly the matter is sent back to Division Bench for disposing off the appeal in above terms. (ITA No.1976/Del/2006, dt. 19-7-2018)(AY. 2001-02)

    CLC & Sons Pvt. Ltd. v. ACIT (2018) 95 taxman.com 219 (SB) (Delhi)(Trib.) www.itatonline.org

100. S.35 : Scientific research –Rejection of weighted deduction in respect of donation cannot be denied when the institution was enjoying approval within the meaning of S. 35(1)(ii) as on date of receipt of donation, no matter that the approval was cancelled subsequently with retrospective effect

     Allowing the appeal of the assessee the Tribunal held that rejection of weighted deduction in respect of donation cannot be denied when the institution was enjoying approval within the meaning of S. 35(1)(ii) as on date of receipt of donation, no matter that the approval was cancelled subsequently with retrospective effect. (ITA No. 532/Mum/2018, dt. 29-6-2018) (AY. 2014-15)

     Vora Financial Service P. Ltd. v. ACIT (2018) 96 taxman.com 88 (Mum)(Trib.), www.itatonline.org

101. S.35 : Scientific research – Deduction on account of purchase of ‘assets’ for its in-house R&D facility is allowable as deduction. Objective behind exclusion clause in S. 43(4)(ii) is to be that expenditure on scientific research should be incurred on research actually carried out by assessee in-house and assessee should not spend money in acquiring rights in or arising out of scientific research carried on by some other person. [Ss.35(1)(iv), 43(4)(ii)]

     Allowing the appeal of the assessee the Tribunal held that, deduction on account of purchase of ‘assets’ for its in-house R&D facility is allowable as deduction. Objective behind exclusion clause in S. 43(4)(ii) is to be that expenditure on scientific research should be incurred on research actually carried out by assessee in-house and assessee should not spend money in acquiring rights in or arising out of scientific research carried on by some other person. Tribunal also held that if interpretation sought to be urged by revenue was to be accepted, then benefit sought to be conferred by provisions of section 35(1)(iv) would virtually be denied in all cases by invoking exclusion clause in section 43(4)(ii). (AY.2008 -09)

     Tata Hitachi Construction Machinery Company Ltd. v. DCIT (2018) 170 ITD 720 (Bang.) (Trib.)

102. S. 37(1) : Business expenditure – capital or revenue expenditure – amortisation of premium paid on leasehold land – premium in nature of rent – premium is allowable as revenue expenditure

     The Appellate Tribunal has held that the assessee had entered into an agreement with various parties for the purchase of leasehold lands at various places, which were to be used for its business operations, for establishing retail outlets, liquid petroleum gas bottling plants and refineries. The leasehold premium amortised by the assessee was in the nature of compensation paid to the landlords, in addition to the rent. Since the leasehold premium amortised by the assessee was in the nature of rent, it was to be allowed as a revenue expenditure in the hands of the asseessee. (AYs. 2006-07, 2007-08)

     Bharat Petroleum Corporation Ltd. v. ACIT (OSD) (2018) 63 ITR 244 (Mum.)(Trib.)

103. S.37(1) : Business expenditure- Settlement charges paid to SEBI without admitting or denying guilt and was paid just to settle dispute, said settlement charges/consent fee could not be equated with penalty for violation of law under Explanation 1 to S. 37(1) of the Act and is allowable as business expenditure. [Securities and Exchange Board of India Act, 1992 , S.11, 1B and of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 R.11]

     Dismissing the appeal of the revenue the Tribunal held that payment to SEBI without admitting or denying guilt and was paid just to settle dispute, said settlement charges/consent fee could not be equated with penalty for violation of law under Explanation 1 to S. 37(1) of the Act and is allowable as business expenditure. Referred ITO v. Reliance Shares & Stock Brokers (P.) Ltd. (2015) 67 SOT 73 (Mum) (Trib.). (AY. 2011-12)

     DCIT v. Anil Dhirajlal Ambani (2018) 171 ITD 144 (Mum) (Trib.)

104. S.37(1) : Business expenditure – Notional addition – Sale at discounted price to retailers was to increase volume of sales through e-commerce – Where a trader transfers his goods to another trader at a price less than market price and transaction is a bona fide one, taxing authority cannot take into account market price of those goods, ignoring real price fetched to ascertain profit from transaction – Revenue cannot bring to tax hypothetical income accordingly the addition was deleted [Ss.2(24), 4, 28(1), 40(A)(2)(a), 145]

     Assessee company is engaged in business of wholesale trader/distributor of books, mobiles, computers and related accessories. Assessee sold the goods to retailers at a price less than their cost price to increase volume of sales through e-commerce. AO rejected the explanation of assessee and made addition on notional basis which was confirmed by the CIT(A). On appeal allowing the appeal of the assessee the Tribunal held that when a trader transfers his goods to another trader at a price less than market price and transaction is a bona fide one, taxing authority cannot take into account market price of those goods, ignoring real price fetched to ascertain profit from transaction. The Tribunal also held that even otherwise, since assessee had not incurred any expenditure to acquire marketing intangibles or for creation of goodwill, impugned order passed by Assessing Officer was not sustainable. Revenue cannot bring to tax hypothetical income accordingly the addition was deleted. (Referred, CIT v. Shoorji Vallabhdas & Co. (1962) 46 ITR 144 (SC) CIT v. Calcutta Discount Ltd. (1973) 91 ITR 8(SC) CIT v. A. Raman & Co. (1968) 67 ITR 11 (SC) and A. Khader Basha v. ACIT (2015) 232 Taxman 434 (Karn.) (HC) (AY. 2015-16)

     Flipkart India (P.) Ltd. v. ACIT (2018) 170 ITD 751 (Bang.) (Trib.)

105. S.37(1) : Business expenditure – Fines and penalties – Levy of penal interest by Reserve Bank of India for failure to maintain statutory liquidity ratio is entitled to deduction in Assessment year in which liability is crystallised

     Tribunal held that, levy of penal interest by Reserve Bank of India for failure to maintain statutory liquidity ratio is entitled to deduction in assessment year in which liability is crystallised. Liability to incur the expenditure had crystallised only on January 28, 2014 relevant to the assessment year 2014-15, i. e., on the date of the letter of intimation by the Reserve Bank of India. Therefore the assessee was entitled to deduction. (AY. 2014-15)

     Chennai Port Trust Employees’ Co-operative 
     Bank Ltd. v. DCIT (2018) 65 ITR 1 (SN)(Chennai) (Trib.)

106. S.37(1) : Business expenditure –Keyman insurance policy in the name of directors is held to be allowable as business expenditure

     Allowing the appeal of the assessee the Tribunal held that Keyman insurance policy in the name of directors is held to be allowable as business expenditure though it is referred as life insurance policies. (AYs. 2011-12, 2012 -13)

     Arcadia Share & Stock Brokers (P.) Ltd. v. ACIT (2018) 170 ITD 616 (Mum.) (Trib.)

107. S.37(1) : Business expenditure – Capital or revenue – Payment of spectrum charges to Department of Telecommunications on quarterly basis is held to be revenue expenditure [S.35BB]

     Tribunal held that payment of spectrum charges was not meant for obtaining a licence to use spectrum, but for actual use of it on regular basis which is allowable as revenue expenditure (AY.2009-10)

     DCIT v. Vodafone Essar Digilink Ltd. (2018) 170 ITD 430 / 193 TTJ 150 (Delhi) (Trib.)

108. S.37(1) : Business expenditure – Capital revenue – Opening of new stores/outlets expenditure on salaries, machinery and other repairs, travelling conveyance professional fees, electricity expenses telephone expenses etc is held to be revenue expenditure

     Dismissing the appeal of the revenue the Tribunal held that expenses incurred on opening of new stores/outlets expenditure on salaries, machinery and other repairs, travelling conveyance professional fees, electricity expenses telephone expenses etc. is held to be revenue expenditure. (AY. 2010-11)

     ACIT v. Reliance Digital Retail Ltd. (2018) 166 DTR 194 (Mum.) (Trib.)

109. S.37(1) : Business expenditure –Interest under Jharkhand VAT Act, 2005 being compensatory nature is allowable as deduction. Penalties being not compensatory nature is held to be not allowable [Jharkhand VAT Act, 2005 S. 30(1), 30(3), 30(4)(d), 63(3)]

     Interest paid under S.30(1) of Jharkhand VAT Act 2005 being compensatory in nature, is allowable deduction as business expenditure Penalties imposed is not allowable deduction.(AY. 2010-11)

     Bokaro Power Supply Co. Ltd. v. Dy. CIT (2018) 191 TTJ 22 (Delhi)(Trib.)

110. S.40(a)(ia) : Amounts not deductible – Deduction at source – Payee in its return disclosing payment received, no disallowance can be made for failure to deduct tax at source – Second proviso to S.40(a) of the Act is to be read as applicable with retrospective effect

     Tribunal held that when the payee in its return disclosing payment received, no disallowance can be made for failure to deduct tax at source .Second proviso to S.40(a) of the Act is to be read as applicable with retrospective effect. (AYs. 2010-11, 2011-12)

     CIT v. Ahmedabad Strips P. Ltd. (2018) 64 ITR 683 (Ahd.) (Trib.)

111. S.40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Professional fees paid to foreign company to know about tax law applicable in that country could not be taxed in India as per Art. 14 of the OECD Model Tax Convention hence not liable to deduct tax at source

     Dismissing the appeal of the revenue the Tribunal held that; Professional fees paid to foreign company to know about tax law applicable in that Country could not be taxed in India as per Art 14 of the OECD Model Tax Convention hence not liable to deduct tax at source. (AY. 2006-07 to 2008-09)

     ACIT v. Deloitte Haskins & Sells (2018) 170 ITD 267 (Mum.)(Trib.)

112. S.40A(2): Expenses or payments not deductible – Excessive or unreasonable – Firm – Partner – When partners of the firm contribute land as stock in trade though provision of S.45(3) would not be applicable, AO can examine reasonableness of payment to partners [S.45(3)]

     On appeal by the revenue the Tribunal held that when the partners of assessee-firm made capital contribution in form of land which was treated as stock-in-trade, provisions S. 45(3) would not apply rather case would be governed by provisions of S 28 to 43A and, thus, AO was entitled to examine reasonableness of payments made to partners for their contribution of land in terms of S 40A(2)(a) accordingly the matter was set aside to examine the issue in terms of S.40A(2)(a) of the Act. (AY. 2007-08)

     ACIT v. Karuna Estates & Developers. (2018) 170 ITD 249 (Visakh) (Trib.)

113. S.40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits – No disallowance can be made for cash payments if the transaction is genuine and the identity of the payee is known. Rule 6DD is not exhaustive. The fact that the transaction does not fall within Rule 6DD does not mean that a disallowance has to be per force made [R.6DD]

     Allowing the appeal of the assessee the Tribunal held that no disallowance can be made for cash payments if the transaction is genuine and the identity of the payee is known. Rule 6DD is not exhaustive. The fact that the transaction does not fall within Rule 6DD does not mean that a disallowance has to be per force made. (ITA No.1065/JP/2016, dt. 15-5-2018)(AY. 2013-14)

     A Daga Royal Arts v. ITO (2018) 94 taxman.com 401 (Jaipur)(Trib), www.itatonline.org

114. S.45 : Capital Gains – Bogus capital gains from penny stocks – In order to treat the capital gains from penny stocks as bogus, the Department has to show that there is a scam and that the assessee is part of the scam. The chain of events and the live link of the assesee’s action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behaviour and disregard the evidence produced by the assessee [S.48]

     Allowing the appeal of the assessee the Tribunal held that. In order to treat the capital gains from penny stocks as bogus, the Dept. has to show that there is a scam and that the assessee is part of the scam. The chain of events and the live link of the assesee’s action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behaviour and disregard the evidence produced by the assessee. In the result, the appeal of the assessee is allowed. (I.T.A No. 2281/Kol/2017, dt. 20-7-2018)(AY. 2014-15)

     Navneet Agarwal v. ITO(Kol)(Trib.), www.itatonline.org

115. S.45: Capital gains – Bogus long-term gains from penny stocks –The transaction cannot be treated as bogus until and unless a finding is given that the shares were acquired by the assessee from the person other than the broker claimed by the assessee. The enquiry conducted by the Investigation, Indore is not a conclusive finding of fact in view of the fact that the shares were duly dematerialised & held in the D-mat account. Merely supplying of statement to the assessee at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assessee [S.10(38)]

     Allowing the appeal of the assessee the Tribunal held that the transaction cannot be treated as bogus until and unless a finding is given that the shares were acquired by the assessee from the person other than the broker claimed by the assessee. The enquiry conducted by the Investigation, Indore is not a conclusive finding of fact in view of the fact that the shares were duly dematerialised & held in the D-mat account. Merely supplying of statement to the assessee at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assessee. Accordingly the appeal of the assessee is allowed. (ITA No. 826/JP/2014, dt. 16-7-2018)(AY. 2010-11)

     Pramod Kumar Lodha v. ITO (Jaipur)(Trib.), www.itatonline.org

116. S. 45: Capital gains – Penny Stocks – 31000% increase in value of shares over 2 years is highly suspicious but cannot take the place of evidence. The addition cannot be made based on generalisations. Evidence collected from third parties cannot be used against the assessee without giving him a copy and an opportunity to rebut the same [S.68]

     Allowing the appeal of the assessee the Tribunal held that merely because 31000% increase in value of shares over 2 years is highly suspicious but cannot take the place of evidence. The addition cannot be made based on generalisations. Evidence collected from third parties cannot be used against the assessee without giving him a copy and an opportunity to rebut the same. (ITA No. 2394/Kol/2017, dt. 27-6-2018)(AY. 2014-15)

     Prakash Chand Bhutoria v. ITO (Kol)(Trib.), www.itatonline.org

117. S.45 : Capital gains – Exchange – Slump sale – A transaction by which an undertaking is transferred in consideration of the allottment of shares is an “exchange” and not a “sale”. The fact that the agreement refers to the parties as “seller” and “purchaser” is irrelevant. S. 2(42C) and S. 50B apply only to “sale” and not to “exchange”. As there is no estoppel against a statute, an assessee is entitled to raise the claim regarding non-taxability at any stage of the proceedings [S.2(42C), 50B]

     Allowing the appeal of the assessee the Tribunal held that a transaction by which an undertaking is transferred in consideration of the allotment of shares is an “exchange” and not a “sale”. The fact that the agreement refers to the parties as “seller” and “purchaser” is irrelevant. S. 2(42C) and S. 50B apply only to “sale” and not to “exchange”. As there is no estoppel against a statute, an assessee is entitled to raise the claim regarding non-taxability at any stage of the proceedings. (ITA No. 2913/Mum/2015, dt. 16-5-2018)(AY. 2007-08)

     Oricon Enterprises Ltd. v. ACIT (2018) 94 taxman.com 250/171 ITD 231 (Mum.)(Trib.), www.itatonline.org

118. S.45 : Capital gains – Alleged bogus long-term capital gains – As neither the statement of Mr. Mukhesh Choksi was provided to the assessee nor cross-examination was allowed and it was not even placed on record, the action of the AO in treating the LTCG and STCG as income from other sources was not warranted. [S. 69 ]

     Dismissing the appeal of the revenue the Tribunal held that as neither the statement of Mr. Mukhesh Choksi was provided to the assessee nor cross-examination was allowed and it was not even placed on record, the action of the AO in treating the LTCG and STCG as income from other sources was not warranted. Tribunal also held that view taken was peculiar to the facts of the case and the revenue is always at liberty to in other cases, to challenge the alleged bogus purchases (based on the statement of Mr. Mukhesh Choksi). (ITA No. 1614/hyd/2017, dt. 29-5-2018)(AY. 2007-08)

     ITO v. K. Ramakrishna Reddy(Hyd.)(Trib.), www.itatonline.org

119. S.45 : Capital gains – Argument that the allotment of shares by the assessee’s holding co. to foreign investors at huge valuation results in a “transfer”/ “indirect transfer” of the assessee’s assets to the foreign investors is not correct. Argument that a multi-layered holding structure was deliberately created to avoid taxes in India and to conceal the information about the ultimate beneficiaries is also not correct [Ss.2 (47), 48]

     Allowing the appeal of the assessee the Tribunal held that the endeavour of the departmental officers to tax the transaction in question as capital gains was not supported by any legal base. First and foremost there was no transfer of capital asset, which is the basis for invoking the provisions of S. 45 of the Act, in the case under consideration.The AO and FAA have tried to build a house without laying down foundation. Without the existence of capital assets they have tried to tax capital gains. They have nowhere mentioned as to which capital asset was transferred by the assessee, during the year under consideration. Secondly, it is also not known as to whom the assets were transferred.As per the balance sheet of the assessee it had sold some vehicles during the year and no other asset was sold.If no asset other than vehicles was sold, then how the capital gain would arise about shares, is beyond our comprehension. In spite of reading the orders of the AO and FAA many a times carefully, we are not clear as to how the acquisition of shares of SOHM by Actis can be used for determining the alleged taxability of the assessee under the head short term capital gains. Both the entitiesi.e. Act is and SOHM are not located in India.They are fifth generation holding companies and any transaction between them cannot be imported to tax alleged capital gains of the assessee. As stated earlier, the assessee had acquired businesses two Indian entities, namely, RCC and VMPL. By linking purchasing of shares of SOHM by Actis with the shares issued by Supermax Personal Care Pvt.Ltd. assessee to the Singapore entity, the AO and FAA have taxed the alleged capital gains.But, the basic fact of transfer of capital asset/(s)by the assessee to a transferee was never proved. Tribunal also observed that the FAA has mentioned in his order that the assessee had transferred the Interest/(stake)in itself outside India to SSPL.We find that the concept of ‘creating of interest in any assets in any manner’ and transferring’ interest/stake’was not part of the word ‘transfer’ for the year under consideration and nor it was applicable to that year. (I.T.A./6107/Mum/2016, dt. 1-6-2018)(AY. 2011-12)

     Supermax Personal Care Private Limted v. ACIT (Mum.)(Trib.), www.itatonline.org

120. S.48 : Capital gains – Computation – Portfolio Management Scheme (PMS) fees paid by the assessee to the PMS Manager neither falls under the category of transfer fees nor cost of acquisition/improvement. Consequently it is not deductible while computing capital gains from sale of the shares [S.45]

     Dismissing the appeal of the assessee the Tribunal held that Portfolio Management Scheme (PMS) fees paid by the assessee to the PMS Manager neither falls under the category of transfer fees nor cost of acquisition/improvement. Consequently it is not deductible while computing capital gains from sale of the shares. (ITA No. 6950/Mum/2016, dt. 30-5-2018)(AY. 2010-11)

     Mateen Pyarali Dholkia v. DCIT (2018) 171 ITD 294/94 taxman.com 294 (Mum.)(Trib.), www.itatonline.org

121. S.48 : Capital gains – Computation – While computing the capital gains the benefit of indexation should be given on basis of date of acquisition of asset and not on basis of actual payment [S. 45, 55(2)]

     Allowing the appeal of the assessee the Tribunal held that while computing the capital gains the benefit of indexation should be given on basis of date of acquisition of asset and not on basis of actual payment. Relied on Lata G. Rohra v. DCIT (2008) 21 SOT 541 (Mum) (Trib), Charanbir Singh Jolly v. ITO (2006) 5 SOT 89( Mum.) (Trib.) (ITA No .1244/Mum/2016 dt. 27-2-2018 (AY. 2011-12)

     Shishir Gorle v. DCIT (Mum.) (Trib.) www.itatonline .org

122. S.48 : Capital gains – Computation – property inherited on death of husband – cost of acquisition to be applied from the year when the previous owner first held asset and not when the assessee inherited the property [S.55A]

     In this case the Appellate Tribunal held that while computing the capital gains arising on transfer of a capital asset inherited by the assessee on the death of her husband, the indexed cost of acquisition had to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. (A.Y. 2007-08)

     Bhoote Meenakshi (Smt.) v. ACIT (2018) 62 ITR 754 (Bang.)(Trib.)

123. S.50C : Capital gains – Full value of consideration – Stamp valuation – If the assessee has invested the entire sale consideration in new house property, the capital gains are exempt u/s. 54F. The AO cannot apply S. 50C and treat the stamp duty valuation as the consideration and assess the difference between the stamp duty valuation and the actual valuation to capital gains [S.54F]

     Dismissing the appeal of the revenue the Tribunal held that if the assessee has invested the entire sale consideration in new house property, the capital gains are exempt u/s. 54F. The AO cannot apply s. 50C and treat the stamp duty valuation as the consideration and assess the difference between the stamp duty valuation and the actual valuation to capital gains. (ITA No. 11/JP/2016, dt. 28-9-2017.)(AY. 2011-12)

     ITO v. Raj Kumar Parashar (2017) 86 taxman.com 78/167 ITD 237 (Jaipur)(Trib.), www.itatonline.org

124. S.50C : Capital gains – Full value of consideration – stamp valuation – Provision being a deeming provision and applies only to the transfer of land or building. It does not apply to the transfer of “booking rights” and to right to purchase flats in a building [S.45]

     Allowing the appeal of the assessee the Tribunal held that, S.50C being a deeming provision and applies only to the transfer of land or building. It does not apply to the transfer of “booking rights” and to right to purchase flats in a building. (ITA No.635/Kol/2018, dt. 4-7-2018)(AY. 2013-14)

     Baniara Engineers Pvt. Ltd. v. ITO (SMC) (Kol.)(Trib.), www.itatonline.org

125. S.54 : Capital gains – Profit on sale of property used for residence – Return – There is no bar / restriction that an assessee cannot file a revised return of income after issuance of notice u/s. 143(2). A revised return of income can be filed even in course of the assessment proceedings provided the time limit prescribed u/s. 139(5) is available. The Departmental Authorities are not expected to deny assessee’s legitimate claim of deduction by raising technical objection- Exemption claimed in revised return was directed to be allowed. [Ss.39(5) 143(2)]

     Assessee filed the revised return u/s. 139(5), offering the capital gain and claiming exemption u/s.54 of the Act. AO held that the revised return being invalid the assessee is not entitle to exemption u/s. 54 of the Act which was confirmed by the CIT(A). On appeal allowing the appeal the Tribunal held that there is no bar/ restriction that an assessee cannot file a revised return of income after issuance of notice 
     u/s. 143(2). A revised return of income can be filed even in course of the assessment proceedings provided the time limit prescribed u/s. 139(5) is available. The Departmental Authorities are not expected to deny assessee’s legitimate claim by raising technical objection. (ITA No. 176/Mum/2017, dt. 20-6-2018)(AY. 2011-12)

     Mahesh H. Hinduja v. ITO (2018) 95 taxman.com 168 (Mum)(Trib), www.itatonline.org

126. S.56: Income from other sources- Share premium- Addition cannot be made in respect of share premium received by assessee from its holding companies as said share premium was on account of capital transaction and was not an income within charging sections of Act. S 56(2)(vii)(b) read with section 2(24)(xvi) are not made applicable to shares issued to Non-Residents mainly to encourage foreign investments. [Ss.2(24)(xvi), 56(1), 56 (2)(vii)(b), 68, Companies Act, 2013, S.52, Companies Act, 1956 S.78]

     Dismissing the appeal of the revenue, Tribunal held that addition cannot be made in respect of share premium received by assessee from its holding companies as said share premium was on account of capital transaction and was not an income within charging sections of Act. Assessee also supported the fair value of equity shares with a certificate issued by a chartered accountant using DCF method which was approved method as prescribed by RBI and assessee had filed its bank statements as well as FIRC issued by its bankers as evidence and thus, no fault lay with assessee in issuing equity shares. Therefore, no addition was warranted towards share premium received by assessee from its holding companies as said share premium was on account of capital transaction and was not an income within charging sections of Act. S 56(2)(vii)(b) read with S. 2(24)(xvi) are not made applicable to shares issued to non-residents mainly to encourage foreign investments. Addition also cannot be u/s. 68 of the Act as the assessee has filed bank statements as well as FIRC issued by its bankers as evidence. The Tribunal also held that the assessee did utilise proceeds of funds raised towards share premium for setting up manufacturing unit for manufacturing soles for footwear for which business purposes funds were stated to be entrusted by shareholders , therefore addition cannot be made as income from other sources. (AY. 2012-13)

     DCIT v. Finproject India (P.) Ltd. (2018) 171 ITD 82 (Mum) (Trib.)

127. S.56 : Income from other sources – Gift – Provisions of section 56(2)(vii)(b) are applicable to only those transactions which are entered into after 1-10-2009 [S.56(2)(vii)(b)]

     AO held that the assessee had received a property worth ` 48.57 lakh without any consideration. Accordingly he added said amount to assessee’s income under section 56(2)(vii)(b) of the Act. Tribunal held that since the impugned transaction was entered into on 6-6-2009, as per registered sale deed, same would not be hit by provisions of section 56(2)(vii)(b).Accordingly the addition was deleted. (AY. 2010-11)

     Shailendra Kamalkishore Jaiswal. v. ACIT (2018) 171 ITD 6 (Nag.) (Trib.)

128. S.56 : Income from other sources – buy back of shares – S.56(2)(vii)(a) is a counter evasion mechanism to prevent laundering of unaccounted income under the garb of gifts. The primary condition for invoking S.56(2)(vii)(a) is that the asset gifted should become a “capital asset” and property in the hands of recipient. If the assessee-company has purchased shares under a buy back scheme and the said shares are extinguished by writing down the share capital, the shares do not become capital asset of the assessee-company and hence 
     S. 56(2)(viia) cannot be invoked in the hands of the assessee company [S.56(2)(vii)(a)]

     Allowing the appeal of the assessee the Tribunal held that S.56(2)(vii)(a) is a counter evasion mechanism to prevent laundering of unaccounted income under the garb of gifts. The primary condition for invoking S. 56(2)(vii)(a) is that the asset gifted should become a “capital asset” and property in the hands of recipient. If the assessee-company has purchased shares under a buy back scheme and the said shares are extinguished by writing down the share capital, the shares do not become capital asset of the assessee-company and hence S. 56(2)(vii)(a) cannot be invoked in the hands of the assessee company. (ITA No. 532/Mum/2018, dt. 29-6-2018) (AY. 2014-15)

     Vora Financial Service P. Ltd. v. ACIT (Mum.)(Trib.), www.itatonline.org

129. S.68 : Cash credits – Presumptive taxation – Retail business – Not maintain books of account – Return filed under presumptive taxation – Cash deposits in bank accounts of assessee – Returned income not matching presumptive rate of tax on gross turnover – Department to treat return as invalid – Addition cannot be made as cash credits [S.44AF]

     Tribunal held that the cash was deposited in the bank accounts of the assessee. The returned income did not match the presumptive rate of tax on the gross turnover of the assessee. In the returns of income itself the assessee made it very clear that she was not maintaining books of account. If the Department was of the view that the returns had not been filed in terms of the provisions of section 44AF nothing prevented the Department from treating the return of income as invalid. The Assessing Officer straightaway applied the provisions of section 68 to the cash found deposited in the bank accounts knowing fully well that the assessee was not maintaining any books of account. An addition under S. 68 can only be made where any sum is credited in the books of the assessee maintained for any previous year. Thus, the very sine qua non for making of an addition under section 68 presupposes a credit of the amount in the books of the assessee. Therefore since no books of account were maintained in the ordinary course of business of the assessee, no such addition under S. 68 was tenable. The Assessing Officer was to delete the additions so made under S.68 in the respective assessment years. Referred CIT v. Bhaichand H.Gandhi (1983) 141 ITR 67 (Bom.) (HC) Anand Ram Raitani v. CIT (1977) 223 ITR 544 (Gauhati)(HC) (AY. 2010-11 to 2012-13)

     Babbal Bhatia (Smt) v. ITO (2018) 65 ITR 532 (Delhi) (Trib.)

130. S.68 : Cash credits – Bogus share premium – Addition cannot be made on the ground that the directors of the share subscribers did not turn up before the AO. The assessee can be required to prove only such facts which are in his knowledge. Creditworthiness of the subscriber cannot be disputed by the AO of the assessee but by the AO of the subscriber. If the assessee has discharged its onus to prove identity, creditworthiness & genuineness of the share applicants, the onus shifts to AO to disprove the documents furnished by assessee. In absence of any investigation, much less gathering of evidence by the AO, an addition cannot be sustained merely based on inferences drawn by circumstance

     Dismissing the appeal of the revenue the Tribunal held that on account of alleged bogus share premium, addition cannot be made on the ground that the directors of the share subscribers did not turn up before the AO. The assessee can be required to prove only such facts which are in his knowledge. Creditworthiness of the subscriber cannot be disputed by the AO of the assessee but by the AO of the subscriber. If the assessee has discharged its onus to prove identity, creditworthiness & genuineness of the share applicants, the onus shifts to AO to disprove the documents furnished by assessee. In absence of any investigation, much less gathering of evidence by the AO, an addition cannot be sustained merely based on inferences drawn by circumstance. Tribunal also held that, S. 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income-tax acknowledgments were placed on AO’s record. Accordingly all the three conditions as required u/s. 68 of the Act i.e., the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under S. 68 of the Act. (ITA. No. 1162/Kol/2015, dt. 14-6-2018) (AY. 2012-13)

     ITO v. Wiz-Tech Solutions Pvt. Ltd.( Kol.)(Trib.), www.itatonline.org

131. S.68 : Cash credits – Bogus share capital – If the AO has remained silent with folded hands and has not made any independent inquiry from the concerned AO of shareholder company and has not controverted the evidence produced by the assessee, that itself is sufficient to knock off the addition made. The fact that there is no personal appearance from director of said cash creditor (share holder) does not mean that an adverse inference u/s. 68 can be drawn by the AO without the AO discharging the secondary burden lying upon him

     Allowing the appeal of the assessee the Tribunal held that if the AO has remained silent with folded hands and has not made any independent inquiry from the concerned AO of shareholder company and has not controverted the evidence produced by the assessee, that itself is sufficient to knock off the addition made. The fact that there is no personal appearance from director of said cash creditor (shareholder) does not mean that an adverse inference u/s. 68 can be drawn by the AO without the AO discharging the secondary burden lying upon him. (ITA No. 3133/Del/2018, dt. 25-6-2018)(AY. 2009-10).

     Moti Adhesives Pvt. Ltd. v. ITO (Delhi)(Trib.), www.itatonline.org

132. S.71 : Set off of loss – One head against income from another – Unabsorbed depreciation and brought forward business loss can be set off against income from other sources [S.72]

     Allowing the appeal of the assessee the Tribunal held that unabsorbed depreciation and brought forward business loss can be set off against income from other sources. (AY.2010-11)

     Nanak Ram Jaisinghani v. ITO (2018) 170 ITD 570 (Delhi) (Trib.)

133. S. 72 : Carry forward and set off of business losses – Speculation losses – There is no bar in adjustment of unabsorbed business losses from speculation profit of current year, provided speculation losses earlier years has been first adjusted from speculation profit [S.71, 73]

     AO did not allow set off of unabsorbed non-speculation business loss incurred by assessee against current year’s speculation profit. CIT(A) up held that order of AO. On appeal Tribunal held that there is no bar in adjustment of unabsorbed business losses from speculation profit of current year, provided speculation losses for earlier years has been first adjusted from speculation profit. Followed CIT v. Ramshree Steels (P.) Ltd. (2018) 400 ITR 61 (All.) (HC)(AY.2011-12)

     Edel Commodities Ltd. v. DCIT ( 2018) 170 ITD 402 (Mum.) (Trib.)

134. S. 72A : Carry forward and set off of accumulated loss and unabsorbed depreciation – Merger – Non-banking finance company (NBFC) – Merger Scheme approved by High Court having in mind larger public interest, Claim of set off of unabsorbed short-term capital loss and unabsorbed business loss incurred by amalgamating companies cannot be denied on ground that amalgamating companies did not own an ‘industrial undertaking’ as defined under S. 72A of the Act. [Ss.72, 74]

     Assessee was a non-banking finance company (NBFC). By virtue of order of High Court, six companies with unabsorbed capital and business losses were merged with assessee-company. Assessee’s claim was denied on ground that amalgamating companies did not own an ‘industrial undertaking’ as defined under S. 72A of the Act. Allowing the appeal of the assessee the Tribunal held that on fact, merger scheme duly approved by High Court having in mind larger public interest, could not be disturbed by revenue merely because assessee was not entitled for benefits under S. 72A of the Act. Tribunal also held that even otherwise, since department had not filed any appeal under section 391(7) of the Companies Act, 1956 against order of amalgamation sanctioned by High Court, by applying doctrine of acquiescence, department would be now barred from raising an objection to scheme. Accordingly the assessee’s claim for set off of unabsorbed losses of amalgamating companies was to be allowed. (AY. 2012-13)

     Electrocast Sales India Ltd. v. DCIT (2018) 170 ITD 507 (Kol.) (Trib.)

135. S.73 : Losses in speculation business – Trading of shares was not primary activity – Solitary transaction of sale of shares could not have been treated as speculative business

     Allowing the appeal of the assessee the Tribunal held that trading of shares was not primary activity of assessee, accordingly the solitary transaction of sale of shares by assessee could not be held to be part of carrying on business of trading in shares, hence, said sale transaction could not have been treated as speculative business of assessee under Explanation to S. 73. (AY. 2003-04)

     Moser Baer India Ltd. v. DCIT (2018) 170 ITD 522 (Delhi) (Trib.)

136. S.74 : Losses – Capital gains – Unquoted shares – Sale of shares at ` 2 per share – long-term capital loss on issue of shares cannot be disallowed merely on basis of suspicion and conjectures without making any enquiries in the hands of the purchaser of shares

     Assessee incurred long-term losses on sale of unquoted shares which was disallowed by the AO on the ground that sale consideration of ` 2 per share had been grossly understated. Allowing the appeal of the assessee the Tribunal held that the onus was on revenue to prove with cogent materials that assessee had indeed received higher sale price. Since no enquiries whatsoever were conducted in hands of purchaser of shares, disallowance made on basis of suspicion and conjectures was to be deleted. (AY. 2012-13)

     Electrocast Sales India Ltd. v. DCIT (2018) 170 ITD 507 (Kol.) (Trib.)

137. S.80 : Return for losses – Unabsorbed depreciation and carried forward losses – A return filed u/s. 153A is deemed to be a return filed u/s. 139(1). Accordingly, the restrictive provisions of S. 80 do not apply. The return u/s. 153A, once accepted and assessed, replaces the original return filed u/s. 139. Therefore, the assessee is eligible for carry forward business loss [Ss.139(1), 153A]

     Dismissing the appeal of the revenue the Tribunal held that a return filed u/s. 153A is deemed to be a return filed u/s. 139(1). Accordingly, the restrictive provisions of S. 80 do not apply. The return u/s. 153A, once accepted and assessed, replaces the original return filed u/s. 139. Therefore, the assessee is eligible for carry forward business loss. (ITA No.2461/DEL/2016, dt. 6-6-2018)(AY. 2010-11)

     ACIT v. Splendor Landbase Ltd. (Delhi)(Trib), www.itatonline.org

138. S.80IA : Industrial undertakings – Infrastructure development –Developer – Contractor – Business of construction/development of Infrastructure facilities such as roads and providing necessary and crucial components of Railway system is entitle to deduction as developer [S.80IA(4)]

     Tribunal held that the assessee, engaged in business of construction/development of Infrastructure facilities such as roads and providing necessary and crucial components of railway system is entitle to deduction as developer. (AYs. 2004-05 to 2009-10)

     Bhinmal Contractors Property and Land Developers (P.) Ltd. v. ACIT DCIT (2018) 170 ITD 599 (Mum) (Trib.)

139. S. 80IE : Undertakings – North – Eastern States – ‘initial assessment year’ would be year in which substantial expansion is completed by assessee which would enable it to generate revenue – Denial of exemption is held to be not justified

     Allowing the appeal of the revenue the Tribunal held that ‘initial assessment year’ would be year in which substantial expansion is completed by assessee which would enable it to generate revenues and claim deduction thereon. Tribunal also held that there is no time limit prescribed in S.80IE as to when substantial expansion should be completed by assessee. Accordingly the denial of exemption is held to be not justified. 
     (AY. 2009-10)

     Jay Shree Industries Ltd. v. JCIT (2018) 170 ITD 479 (Kol.) (Trib.)

140. S.90 : Double taxation relief –The failure to submit a ‘Tax Residency Certificate’ (TRC) as required by S. 90(4) is not a bar to the grant of benefits under the DTAA. However, the assessee is required to produce reasonable evidence of the entitlement of the foreign entity to benefits under the DTAA-India – USA. [S.90(4), Art. 12(4)(b)]

     Allowing the appeal of the assessee the Tribunal held that the failure to submit a ‘Tax Residency Certificate’ (TRC) as required by S. 90(4) is not a bar to the grant of benefits under the DTAA. However, the assessee is required to produce reasonable evidence of the entitlement of the foreign entity to benefits under the DTAA. (ITA Nos. 478 / 479/Ahd/2018, dt. 21-6-2018)(AY. 2013-14, 2014-15)

     Skaps Industries India Pvt.Ltd. v. ITO (2018) 94 taxman.com 448 (Ahd)(Trib), www.itatonline.org

141. S.92B : Transfer Pricing – International transactions – Investment in share capital of subsidiaries outside India – Advancing towards investment and for expansion of business out of interest free funds – No interest can be charged – Not in nature of international transaction-Transfer pricing provision is not applicable – Adjustment is not required [S.92C]

     Allowing the appeal of the assessee, the Tribunal held that investment in share capital of subsidiaries outside India. Advancing towards investment and for expansion of business out of interest free funds interest cannot be charged. Transaction is not in nature of international transaction hence transfer pricing provisions is not applicable. Accordingly adjustment is not required. (AYs. 2008-09 to 2011-12)

     Bartronics India Ltd. v. DCIT (2018) 65 ITR 540 (Hyd.) (Trib.)

142. S.92C : Transfer Pricing – Arm’s Length Price – Outstanding expenses – Interest – Period of 60 days reasonable within which expenses ought to have been recovered – SBI-PLR rates alone should be calculated without any 3 per cent spread. 8.15 per cent should be adopted while calculating Arm’s Length Price interest – Opportunity cost to assessee’s funds to be calculated in relation to interest earning capacity in domestic market [S.92B]

     Tribunal held that for recovery of outstanding expenses, interest period of 60 days reasonable within which expenses ought to have been recovered. SBI-PLR rates alone should be calculated without any 3 per cent spread 8.15 per cent should be adopted while calculating Arm’s Length Price interest. Opportunity cost to assessee’s funds to be calculated in relation to interest earning capacity in domestic market. (AY. 2012-13)

     Allianz Cornhill Information Services P. Ltd. v. DCIT (2018) 65 ITR 33 (SN) (Cochin) (Trib.)

143. S. 115JB : Book profit – Ascertained liability – Assessing Officer has no power to go behind profit/loss declared for company law purposes, and ‘book profit’ shown therein has to be taken as base for making adjustments under section 115JB. Addition cannot be made – Clause (c) of Explanation 1 to section 115JB merely speaks of making additions to book profit, only in event where provision made for meeting liabilities is not an ascertained liability [S.36(1)(vii), 36(1)(viia)]

     Tribunal held that as per clause (c) of Explanation 1 to section 115JB, provision made for doubtful debts, being unascertained liability, deserves to be added to book profit, however the Assessing Officer has no power to go behind profit/loss declared for company law purposes, and ‘book profit’ shown therein has to be taken as base for making adjustments under section 115JB. Clause (c) of Explanation-1 to section 115JB merely speaks of making additions to book profit, only in event where provision made for meeting liabilities is not an ascertained liability. In the peculiar facts of the case, the addition made by the Assessing Officer to the tune of 
     ` 22.19 crores is not in accordance with law since this is a part of the ascertained liability which was otherwise adjusted in the provision account separately maintained by the assessee though, while claiming write off, it was restricted to 
     ` 22.89 crore. In other words, in principle, the view taken by the Accountant Member is agreed with. The assessee is not entitled to further reduction to the book profit but the disallowance of ` 22,89,02,937 deserves to be set aside. (AY. 2009-10)

     Southern Power Distribution Company of AP Ltd. v. DCIT (2018) 170 ITD 1(TM) (Hyd.) (Trib.)

144. S.142(2A) : Inquiry before assessment – Special audit – AO not giving any finding about nature and complexity of accounts, volume of accounts, multiplicity of transactions, specialised nature of business activity of assessee – Order being no speaking order for special audit was held to be not valid – Since the direction for special audit was without proper jurisdiction the time so taken could not be counted and the period did not get extended. Since the order was passed on July 28, 2010, it was time barred. Therefore the order passed by the Assessing Officer was bad in law [S.153C]

     Tribunal held that the services of the expert in the field of accounts cannot be denied to the AO. At the same time, reasonable satisfaction to be brought out on record about the nature and complexity of the accounts. The AO had not given any finding about the nature and complexity of accounts, volume of accounts, multiplicity of transactions, or the specialised nature of business activity of the assessee. The assessee had submitted books of account translated in English and the reasons given by the AO, viz., that details had not been given, the intricate the nature of the seized material, that the true picture of undisclosed income could not be worked out within a span of a week, could not make any valid ground for referring a case to special audit. Even when the books of account had not been called for satisfaction as to the nature and complexity of accounts of the assessee is a sine qua non for directing the assessee to get the accounts audited by an accountant as defined in the Explanation below sub-section (2) of section 288. As there was no speaking order and giving no reason for arriving at the conclusion having regard to the nature and complexity of the accounts the order under section 142(2A) was bad in law. Since the direction for special audit was without proper jurisdiction the time so taken could not be counted and the period did not get extended. Since the order was passed on July 28, 2010, it was time barred. Therefore the order passed by the Assessing Officer was therefore, bad in law. (AYs. 2005-06 to 2008-09)

     Sunder Mal Sat Pal v. ITO (2018) 65 ITR 28 (SN) (Chd) (Trib)

145. S.143(2) : Assessment – Notice – Reassessment – If the notice u/s. 143(2) is issued prior to the furnishing of return by the assessee in response to notice u/s. 148, the notice issued u/s. 143(2) is not valid and the reassessment framed on the basis of said notice has to be quashed. S. 292BB does not save the assessment [Ss.147) 148, 292BB]

     Allowing the appeal of the assessee, the Tribunal held that if the notice u/s. 143(2) is issued prior to the furnishing of return by the assessee in response to notice u/s. 148, the notice issued u/s. 143(2) is not valid and the reassessment framed on the basis of said notice has to be quashed. S. 292BB does not save the assessment.(ITA Nos. 5163 & 5164/Del/2010 & ITA No. 5554/Del/2012 dt. 2-7/2018) (AYs. 2004-05, 2005-06)

     Halcrow Groups Ltd.v. ADIT (Delhi)(Trib), www.itatonline.org

146. S.143(3) : Assessment – Amalgamation – Assessment in name of Company not in existence having amalgamated with another is liable to be cancelled as nullity being bad in law [S.263]

     Allowing the appeal of the assessee the Tribunal held that assessment in name of Company not in existence having amalgamated with another is liable to be cancelled as nullity being bad in law. The Assessing Officer was at liberty to have alternative recourse and such a course of action could be taken by the Assessing Officer only if it was still permissible in terms of law and had not become time barred. (AY. 2008-09)

     Basundhara Goods P. Ltd. ITO (2018) 65 ITR 62 (SN) (Kol.) (Trib.)

147. S.143(3): Assessment – Income from undisclosed sources – Survey – Surrendered during survey and assessee retracting statement – Onus is on AO to investigate further and establish additions made on basis of surrender –Addition cannot be made merely on the basis of surrender – Addition of ` 1,42,778 on account of gross profit was confirmed. [S.133A]

     Tribunal held that merely on the basis of statement surrendered during survey which was retracted addition cannot be made. Onus is on AO to investigate further and establish additions made on basis of surrender. Addition of ` 1,42,778 on account of gross profit was confirmed.

     Satish Chand Agarwal v. ITO (2018 64 ITR 713 (Jaipur) (Trib.)

148. S.143(3) : Assessment – On Money – The fact that the assessee has sold flats at an undervaluation does not mean that he has understated the consideration and earned undisclosed ‘on money’. The mere presumption that excess price could have been charged is not a ground for coming to the conclusion that the assessee did charge a higher price. The burden of proving such understatement or concealment is on the Revenue- Addition was deleted

     Allowing the appeal of the assessee, the Tribunal held that the fact that the assessee has sold flats at an undervaluation does not mean that he has understated the consideration and earned undisclosed ‘on money’. The mere presumption that excess price could have been charged is not a ground for coming to the conclusion that the assessee did charge a higher price. The burden of proving such understatement or concealment is on the Revenue .Accordingly the addition was deleted. Tribunal considered the ratio in in ITO v. Diamond Investment and Properties in ITA No. 5537/M/2009 dt. 29-7-2010 and ACIT v. Rustom Soli Sethna, ITA No. 5086/M/2014 dt. 22-6-2017 Prashant Arjunrao Kolhe v. DCIT [2016] 75 taxmann.com 156(Mum)( Trib), Aum Shiv Enterprises v. ACIT ITA No. 6985 /M/2010 dt.24-8-2013 (Mum) (Trib), Neelkamal Realtors and Erectors v. DCIT ITA No.1143/M/2013 dt. 16-8-2013 (Mum) (Trib) and K.P. Varghese v. ITO (1981) 131 ITR 597 (SC). (ITA No.2656/Mum/2016, dt. 25-5-2018) (AY. 2012-13)

     Shah Realtors v. ACIT (Mum)(Trib), www.itatonline.org

149. S.145 : Method of accounting – Real estate construction contracts – Consistency method of accounting – Completed contract – Percentage completion – Accounting Standards AS-7 and AS-9 – AO was not justified in applying the percentage completion method on the assessee merely on the basis that it was followed by the developer JSM DPL and arbitrarily making addition to the income ignoring the fact that project completion method/ completed contract method of accounting has been consistently adopted by the assessee. [Ss. 5, 43C]

     Allowing the appeal of the assessee the Tribunal held that in the instant appeal assessee even though not directly involved in the construction activity and it is merely gave its land for development and it was agreed between the assessee company and the developer that 32% of the saleable area shall be given to the assessee. The assessee has constituently followed completed project contract/percentage completion method as recognised its revenue at the time of execution of getting the sale deed registered and before that it has to be consistently showing the advance from sale of flats as the liability in the balance sheet. Accordingly in the given circumstances of the case and in the light of judgment referred in preceding paragraphs are of the considered view that the Ld. AO was not justified in applying the percentage completion method on the assessee merely on the basis that it was followed by the developer JSM DPL and arbitrarily making addition to the income ignored the fact that project completion method/ completed contract method of accounting has been consistently adopted by the assessee and even has been accepted by the revenue authority for the A.Y. 2010-11 and A.Y. 2011-12. We therefore set aside the findings of learned CIT(A) and delete the addition of ` 16,12,34,754/- for Assessment Year 2012-13. (ITA No.121/Ind/2016 & 686/Ind/2016, dt. 3-8-2018)(AYs. 2012-13, 2013-14)

     Ashok H-Tech Builders Pvt. Ltd. v. DCIT (Indore)(Trib.), www.itatonline.org

150. S.147 : Reassessment – After the expiry of four years – If there is nothing in the recorded reasons to suggest that the income chargeable to tax which has escaped assessment is ` one lakh or more, the notice issued u/s. 148 of the Act beyond four years of the end of the relevant assessment year is invalid [S.148]

     Allowing the appeal of the assessee the Tribunal held that if there is nothing in the recorded reasons to suggest that the income chargeable to tax which has escaped assessment is ` one lakh or more, the notice issued u/s. 148 of the Act beyond four years of the end of the relevant assessment year is invalid. Followed Mahesh Kumar Gupta v. CIT ( 2014) 363 ITR 300 (All) (HC) Amar Nath Agarwal v. CIT (2015) 371 ITR 183 (All.) (HC) (ITA No. 167/Agra/2018, dt. 19-6-2018)(AY. 2007-08)

     Usha Agarwal v. ITO (SMC) (Agra)(Trib), www.itatonline.org

151. S.147 : Reassessment – After the expiry of four years – Bogus share capital – Statement was retracted – No allegation of failure on part of assessee to disclose material facts – Reasons recorded without independent application of mind – Reassessment is held to be invalid [S.148]

     Tribunal held that, there is no allegation of failure on part of assessee to disclose material facts. Reasons recorded without independent application of mind. The statement of two persons relied upon was retracted and alleged statements of two persons were not with the AO at the time of reopening of assessments. No enquiry or prima facie verification was made. Therefore the reopening was bad in law as the reasons recorded were without application of mind. (AY. 2009-10)

     ACIT v. Adhunik Cement Ltd. (2018) 64 ITR 65 (SN) (Kol.) (Trib.)

152. S.147 : Reassessment – Merely on the basis of statement recorded by investigation wing and cross examination was not provided – Reopening assessment on borrowed satisfaction rather than his own satisfaction –Reassessment is held to be invalid [S.148]

     Tribunal held that the validity of reassessment proceedings has to be judged with the material available with the Assessing Officer and opinion are strictly based on documents and information in possession of the Assessing Officer. No reopening can be made in mechanical manner. Reopening cannot be based on borrowed satisfaction. The independent satisfaction of the Assessing Officer is the basic necessity. (AY. 2007-08, 2008-09)

     Nirmala Agarwal v. ACIT (2018) 64 ITR 658 (Jaipur) (Trib.)

153. S.147 : Reassessment – If the reopening is based on information received from the investigation dept., the reasons must show that the AO independently applied his mind to the information and formed his own opinion. If the reopening is done mechanically, it is void. Also, if the reasons refer to any document, a copy should be provided to the assessee. Failure to do so results in breach of natural justice and renders the reopening void [S.148]

     Allowing the appeal of the assessee the Tribunal held that if the reopening is based on information received from the investigation dept., the reasons must show that the AO independently applied his mind to the information and formed his own opinion. If the reopening is done mechanically, it is void. Also, if the reasons refer to any document, a copy should be provided to the assessee. Failure to do so results in breach of natural justice and renders the reopening void. (ITA Nos. 41 & 40/Agra/2017, dated 1-6-2018)(AY. 2010-11)

     Deepraj Hospital (P) Ltd. v. ITO (Agra)(Trib.), www.itatonline.org

154. S. 147 : Reassessment – Search-original assessment was pending before Commissioner (Appeals) – Assessing Officer is not empowered to issue reassessment notice — Reassessment is held to be illegal as void ab initio. [Ss.148, 153A]

     Tribunal held that the proceedings initiated under S. 153A of the Act were still pending for adjudication before the Commissioner (Appeals) when the notice under S. 148 of the Act was issued. The same issue of addition of ` 12 lakhs, being loan received from KVF, was the subject matter of the section 153A proceedings as well as the section 148 proceedings. There could not be two parallel proceedings on a similar subject matter and proceedings initiated first must come to an end for making way for initiation of other proceedings on the same subject matter. According to the statutory scheme and the provisions of the Act during the pendency of proceedings under S. 153A the Assessing Officer was not empowered to issue notice under Ss. 147 / 148. Therefore the reassessment proceedings for assessment year 2003-04 suffered from the basic defect of the reassessment notice being illegal and, therefore, the reassessment proceedings could not be sustained. Accordingly the reassessment proceedings for the assessment year 2003-04 were quashed as void ab initio. (AYs. 2003-04, 2004-05)

     Vipul Motors P. Ltd. v. ACIT (2018) 65 ITR 12 (SN) (Delhi) (Trib)

155. S.151 : Reassessment – Sanction for issue of notice – If the CIT merely states “Yes, I am satisfied” while granting sanction to the reopening, it means that the sanction is merely mechanical and he has not applied independent mind. There is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment- Order was quashed and held to be void ab-initio. [Ss.147, 148]

     Allowing the appeal of the assesee the Tribunal held that if the CIT merely states “Yes, I am satisfied” while granting sanction to the reopening, it means that the sanction is merely mechanical and he has not applied independent mind. There is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment- Order was quashed and held to be void ab initio. (I.T.A. No. 238/Agra/2018 & I.T.A No. 129/Agra/2018, dt. 19-6-2018)(AY. 2008-09)

     Ghanshyam v. ITO (SMC)(Agra)(Trib.), www.itatonline.org

156. S.151 : Reassessment – Sanction for issue of notice – If the AO reopens on the basis of information received from another AO without further inquiry, it means he has proceeded “mechanically” and “without application of mind”. If the CIT does not give reasons while according sanction, it implies that he has also not applied his mind. Both render the reopening void [Ss.147, 148]

     Allowing the appeal of the assessee the Tribunal held that if the AO reopens on the basis of information received from another AO without further inquiry, it means he has proceeded “mechanically” and “without application of mind”. If the CIT does not give reasons while according sanction, it implies that he has also not applied his mind. Both render the reopening void (ITA No. 988/Del/2018, dt. 25-5-2018) (AY. 2008-09)

     Sunil Agarwal v. ITO (Delhi)(Trib), www.itatonline.org

157. S.159 : Legal representatives –Notice or order on dead person or wound up company is a nullity subject to condition that the department is made aware of the death or winding up. If the assessee participated in the proceedings and thereafter has taken the plea that order or notice was served on dead person, wound-up company are nullity. In such cases, the assessment is liable to be set-aside for a fresh assessment in accordance with law instead of its annulment. [Ss.163, 176]

     Tribunal held that a notice/order on a dead person/wound-up company is a nullity, this is subject to the condition that the department is made aware of the death/winding-up. If the legal representative, either voluntarily or in response to a notice issued against the deceased but served upon his agent, allows the assessment proceedings to continue against the deceased/ wound-up company without any objection and lets the AO make an assessment order, it would not be open for him to take a plea at the appellate stage, as a last resort or as an afterthought, that the proceedings taken and the assessment order made against the deceased/ wound-up company are nullity. In such cases, the assessment is liable to be set-aside for a fresh assessment in accordance with law instead of its annulment. (ITA No.1929/Del/2017, dt. 19-6-2018)(AY. 2012-13)

     Pesak Ventrue Ltd. v. DCIT (2018) 95 taxman.com 113 (Delhi)(Trib.), www.itatonline.org

158. S.161 : Liability of representative assessee – Income from house property – Shares of beneficiaries are definite – Trust cannot be assessed separately at maximum rate – Tax on the share of each beneficiary will have to be separately calculated as if it formed a part of the beneficiary’s income. Tax payable by the Trust will be the sum total of the tax calculated on the share of each beneficiary. [Ss.22, 26, 164]

     Assessee was a family trust with 14 beneficiaries having equal shares. During previous year relevant to assessment year assessee was in receipt of only rental income. Shares of all beneficiaries were determined and known. AO held that shares of beneficiaries though definite in trust, they were not co-owners of trust property, thus, S. 26 mandating assessment in hands of each beneficiary separately would not apply. AO assessed rental income in hands of assessee-trust at maximum marginal rate instead of allotting it in hands of beneficiaries. Allowing the appeal of the assessee the Tribunal held that since beneficiaries were real owners of property of trust and their shares of income were determined, tax on share of each beneficiary would be separately calculated as if it formed a part of beneficiary’s income and tax 
     payable by trust would be sum total of tax calculated on share of each beneficiary. (AY. 2007-08)

     Abad Trust v. ADI (E) (2018) 171 ITD 50 (Cochin) (Trib.)

159. S. 194A : Deduction at source – Interest other than interest on securities – Non-resident – External commercial borrowings with ICICI Bank Singapore Branch – ICICI Bank Indian resident company and its global income including offshore Branch chargeable to tax in India – Not liable to deduct tax at source. Matter was set aside for verification [Ss.6(3), 194A (3) (iii), 195, 201 (1) 201(iA)]

     Allowing the appeal of the assessee the Tribunal held that the office of the Joint Commissioner Mumbai had clarified by his letter dated January 24, 2011 that the ICICI-Bank was an Indian resident company in terms of S.6(3)(iii) and the global income of the bank including the offshore branch was chargeable and was assessed to tax in India. Any payment made to a resident banking company does not come within the purview of tax deduction at source in terms of the provisions of S. 194A(3)(iii). The agreement between the assessee and the bank stated that the bank was acting as an arranger-cum-facility agent. The Singapore branch was the original lender. But the letter written by the Singapore branch stated that it was an arranger and facility agent and the lender of the loan was a group of financial institutions to be assembled by the arranger. The facts were contradictory to each other according to the assessee’s own record. Therefore the issue needed to be re examined by the Assessing Officer in the light of the claim of the assessee that the Singapore branch was the main lender. The assessee was directed to substantiate its case with further evidence. In case the Assessing Officer found that the Singapore branch was the lender of external commercial borrowing there was no default in deduction of tax at source under section 201(1) and (1A). Hence the issue was set aside to the Assessing Officer with a direction to consider the issue afresh in the light of the evidence filed by the assessee. (AYs. 2009-10, 2011-12)

     Bajaj Eco Tec Products Ltd. v. ITD (TDS) (2018) 65 ITR 48 (SN) (Mum.) (Trib.)

160. S.194I : Deduction at source – Rent – Hoarding – If a person has taken a particular space on rent and thereafter sub-lets same, fully or in part, for putting up a hoarding, such payments would be liable for tax deduction at source under S. 194-I and not under S. 194C of the Act. [Ss.194C, 201(1))201(IA)]

     Tribunal held that as per CBDT, Circular 715 dt. 8-8-1995(1995) 215 ITR 12 (St), a contract for putting up a hoarding is in nature of advertising contract and provisions of S. 194C would be applicable however, if a person has taken a particular space on rent and thereafter sub-lets same, fully or in part, for putting up a hoarding, such payments would be liable for tax deduction at source under S.194I and not under S. 194C of the Act. The matter was remanded to the AO to decide according to law. (AYs. 2003-04, 2005-06)

     Accord Advertising (P.) Ltd. v. ITO (2018) 171 ITD 111 (Mum.) (Trib.)

161. S.199 : Deduction at source – Credit for tax deducted – Credit for tax deducted at source has to be given in assessment year in which income has actually been assessed/offered to tax and not in year of deduction itself

     Tribunal held that credit for tax deducted at source has to be given in assessment year in which income has actually been assessed/offered to tax and not in year of deduction itself.(AY. 2010-11)

     Surendra S. Gupta. v. ACIT (2018) 170 ITD 732 (Mum.) (Trib.)

162. S.206AA : Requirement to furnish Permanent Account Number –Payment to Non-Resident – Assessee can apply the rate prescribed under DTAA if it is beneficial to him – Provision of S.206AA does not override provisions of DTAA [Ss. 90, 195]

     Allowing the appeal of the assessee the Tribunal held that assessee can apply the rate prescribed under DTAA if it is beneficial to him. Provision of S.206AA does not override provisions of DTAA. (AY. 2013-14)

     Emmsons International Ltd. v. DCIT (2018) 171 ITD 140 (Delhi) (Trib.)

163. S.219 : Credit for advance tax –Succession of business – Receipt on account of Mobilisation advance under work order when assessee was partnership – Succession by Company – Credit should be given to the assessee in subsequent year whenever receipt or part of receipt recognised as income by Company

     Tribunal held that according to the provisions of S. 219 tax credit on account of tax deduction at source was available in respect of the corresponding income offered to tax by the assessee. Although tax at source was deducted on the amount which was received by the assessee as mobilisation advance and the amount had to be recognised as income of the assessee in the subsequent year due to the succession of business of the assessee’s partnership by the company the tax deduction at source in the name of the assessee would not automatically be available for credit to the company. Accordingly, the Assessing Officer was to allow the credit of the tax deduction at source available in the account of the assessee which had ceased to exist due to the succession of the business activity by the company in the subsequent year whenever the receipt or part of the receipt was recognised as income by the company (AY. 2012-13)

     ITO v. Dreamax Infrastructure Developers. (2018) 65 ITR 500 (Jaipur) (Trib.)

164. S.249 : Appeal – Commissioner (Appeals) – Form of appeal and limitation – E-filing of appeal is not applicable to order passed prior to 1-3-2016 [S.246A]

     Allowing the appeal of the assessee the Tribunal held that e-filing of appeal is not applicable to order passed prior to 1-3-2016. CIT(A) was directed to admit the appeal and pass an order on merits. (Notification No. SO.637 (E) [No. 11/2016 (F. No. 149/150/2015 -TPL), dated 1-3-2016) (AY. 2009-10)

     Ashraf Aziz Kasmani v. ITO (2018) 170 ITD 230 (Mum.) (Trib.)

165. S.249 : Appeal – Commissioner (Appeals) – Form of appeal and limitation – e-filing of appeals before CIT(A) w.e.f. 1-4-2016 – Appeal filed in paper format should be permitted to make good the defect and file an appeal electronically – Appeal cannot be rejected on technical grounds. Delay in filing the appeal is condoned and CIT(A) is directed to decide the issue on merits. [R.45]

     Allowing the appeal of the assessee, the Tribunal held that appeal filed in paper format should be permitted to make good the defect and file an appeal electronically. Appeal cannot be rejected on technical grounds. Assessee is directed to file the appeal electronically with in 10 days from the date of receipt of the order. Delay in filing the appeal is condoned and CIT(A) is directed to decide the issue on merits. (ITA No. 7134/Mum/2017 dt 4-5-2018 (SMC)(AY. 2013-14)

     All India Federation of Tax Practioners v. ITO (Mum.) (Trib.) www.itatonline.org

166. S.250 : Appeal – Commissioner (Appeals) – Procedure – All issues to be mandatorily adjudicated when specific ground is raised. Matter remanded to CIT(A) to decide all the issues raised before him afresh which were not adjudicated [R.27]

     In appeal before the CIT(A) the assessee has challenged the addition on facts as well as on jurisdictional issue on reopening of assessment – CIT(A) has decided the issue on jurisdiction in favour of assessee, however he has not decided the issue on merits. On appeal by revenue the assessee has filed application under Rule 27 of the ITAT Rules and contended that CIT(A) ought to have decided the matter on merits. Tribunal held that even if a decision is challenged before the first appellate authority both on issue of validity of jurisdiction as well as merits of the case, the adjudication on the issue of merits can by no stretch of imagination be liable for rejection on the ground that the assessment has been quashed due to change of opinion. Ref : CIT v. Ramdas Pharmacy [1970] 77 ITR 276 (Mad.) (HC). (I.T.A. No.3662/Mum/2016, dt. 2-7-2018) (AY. 2006-07)

     DCIT v. J. M. Financial Institutional Securities Ltd. (Mum.) (Trib.), www.itatonline.org

167. S.251 : Appeal – Commissioner (Appeals) – Powers – CIT (A) has no power to travel beyond the subject-matter of the assessment and is not entitled to assess new sources of income. In order for the CIT(A) to enhance, there must be something in the assessment order to show that the AO applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection – Enhancement of long term capital gains on sale transaction was deleted [S.246A]

     Tribunal held that CIT(A) has no power to travel beyond the subject-matter of the assessment and is not entitled to assess new sources of income. In order for the CIT(A) to enhance, there must be something in the assessment order to show that the AO applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. Enhancement of long term capital gains on sale transaction was deleted. (ITA Nos. 751, 752, 753/JP/2015, dt. 25-5-2018)(AYs. 2006-07, 2007-08, 2008-09)

     Jagdish Narayan Sharma v. ITO (Jaipur)(Trib.), www.itatonline.org

168. S.253 : Appellate Tribunal – Tax Effect – Below ` 10 lakhs – Where the addition relates to undisclosed foreign assets/ bank accounts – Exception to circular – Appeal by revenue is maintainable

     The Tribunal held that since the present case was falling within the exceptions carved out in the Circular No. 21/2015 dt. 10-12-2015, appeals have to be contested where the addition related to undisclosed foreign assets/bank accounts. Assessee is having foreign bank account and information thereof has been received by Indian authorities inasmuch as the assessee has used Indian address. Hence, the appeal by the Revenue having been filed in accordance with the CBDT Circular in this regard is duly maintainable. (ITA No. 5889/Mum/2016 dt. 1-6-2018 (AY. 2003-04),

     DCIT v. Rahul Rajnikant Parikh & Ors (Mum.) (Trib.), www.itatonline.org

169. S.253 : Appellate Tribunal – Territorial jurisdiction – Stay –Location of Assessing Officer, at point of time when Tribunal hears and determines case, is relevant for determining jurisdiction of Bench to hear stay/appeals – Registry was directed to place matter before President to take final call on issue, hence the Registry was directed to place matter before President for final decision on transfer of assesee’s case to Delhi Benches [S. 127, ITATR, 4]

     Tribunal held that the Assessing Officer having jurisdiction to assess the income of the assessee is located in New Delhi, which falls in jurisdiction of Delhi therefore the jurisdiction for hearing of these applications, and hearing of the related appeals, vests in Delhi Benches of this Tribunal. However, it is for the Hon’ble President to take a final call on the issue, as is the unambiguous thrust of Rule 4(1) of the ITAT Rules. We, therefore, deem it fit and proper to direct the Registry to place all stay applications and related appeals, as indeed all other appeals of this assessee, before Hon’ble President for appropriate orders. In order to ensure, however, that these applications are not rendered infructuous or nugatory by recovery of the impugned outstanding tax demands in the meantime, we also take on record the categorical assurance so graciously extended by the learned Departmental Representative, not to take any coercive measures for recovery or collection of the outstanding disputed demands till the time the present stay applications are disposed of by the Tribunal.

     In the result, while, in our considered view, the correct jurisdiction of hearing these appeals is with Delhi Benches, the matter is to be placed before Hon’ble President for directing transfer of appeals, as he, under the scheme of Rule 4(1) of the ITAT Rules, is the final arbiter on this issue. (S.A. Nos. 41 to 45/Ahd/2018 dt.11-5-2018) (AY. 2008-09, 2009-10)

     Vedanta Ltd. v. ADIT (IT) (2018) 170 ITD 652 (Ahd.) (Trib.)

170. S.254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – Principles of Natural Justice – Judgments relied upon by the ITAT were not confronted to any of the parties – Mistake apparent on record – Order was recalled

     Allowing the application of the assessee, the Tribunal held that judgments relied upon by the ITAT were not confronted to any of the parties and hence the order was recalled. Tribunal relied on Inventure Growth & Securities Ltd. (2010) 324 ITR 319 (Bom.) (HC), Deepak Dalela v. ITO (2014) 147 ITD 19 (Jaipur) (Trib.), CIT v. Quality Steel Tubes Ltd. (2012) 253 CTR 298 (All.) (HC); Honda Siel Power Products Ltd. v. CIT (2007) 295 ITR 466 (SC); CIT v. S. Kumar Tyres Mfg. Co. (2008) 305 ITR 360 (MP) (HC) and Naresh K. Pahuja v. ITO (2009) 224 CTR 284 (Bom) (HC).

     MA No. 223/M/2017, dt. 2-3-2018 (AY. 2009-10) Hikal Ltd. v. CIT (Mum.) (Trib.)

171. S.254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Excessive delay by the Tribunal in passing judgement shakes the confidence of the litigants – orders have to be passed invariably within three months of the completion of hearing of the case. The delay is incurable. Even administrative clearance cannot cure the delay. Such decisions rendered after 
     3 months reflect a mistake apparent from the record and have to be recalled and the appeals heard afresh [R.34(5)]

     Allowing the petition the Tribunal held that excessive delay by the Tribunal in passing judgment shakes the confidence of the litigants. Under Rule 34(5) of the Tribunal Rules read with Shivsagar Veg. Restaurant v. ACIT (2009) 317 ITR 433 (Bom.) & Otters Club v. DIT (E) (2017) 392 ITR 244 (Bom.)(HC) orders have to be passed invariably within three months of the completion of hearing of the case. The delay is incurable. Even administrative clearance cannot cure the delay. Such decisions rendered after 3 months reflect a mistake apparent from the record and have to be recalled and the appeals heard afresh. (ITA No. 1994/Mum/2014 dt.1-2-2016)(MA No. 151/Mum/2016, dt. 11-5-2018)(AY. 2007-08)

     Crompton Greaves Limited v. CIT (Mum)(Trib.), www.itatonline.org

     Editorial: Crompton Creaves Ltd v. CIT (2016) 46 ITR 465/ 177 TTJ 1/(2017) 82 taxmann.com (Mum.) (Trib.) is recalled. (S.263 Revision – Explanation 2 is declaratory nature.)

172. S.254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – The limitation period for filing a Rectification Application has to be computed from the date of “communication” of the order and not from the date of passing the order. The fact that the order was pronounced in open court is not relevant because the parties will not be aware of the mistakes therein until after perusal of the order

     Allowing the application the Tribunal held that the limitation period for filing a Rectification Application has to be computed from the date of “communication” of the order and not from the date of passing the order. The fact that the order was pronounced in open court is not relevant because the parties will not be aware of the mistakes therein until after perusal of the order. (M.A. No. 42/Chd/2018, dt. 27-4-2018)(AY. 2013-14 )

     Jagmohan Gurbakshish Singh v. DCIT ( Chad)(Trib), www.itatonline.org

     Universal Print O Paxk v. ITO (Chad.)(Trib.), www.itatonline.org

173. S.263 : Commissioner – Revision of orders prejudicial to revenue – Share application money – No finding that assessee’s unaccounted money routed through circuitous manner – Assessment order accepting share capital/share premium is not prejudicial to interests of revenue – No Adverse finding or comment by Commissioner as why work-in-progress shown by assessee at nil is not correct or requires further inquiry or verification – Revision was held to be not valid [Ss.68, 145]

     Allowing the appeal of the assessee the Tribunal held that CIT has not given any finding that assessee’s unaccounted money routed through circuitous manner.Assessment order accepting share capital/share premium is not prejudicial to interests of revenue Tribunal also held that no Adverse finding or comment by Commissioner as why work-in-progress shown by assessee at nil is not correct or requires further inquiry or verification. Accordingly the revision was held to be not valid (AY. 2014-15)

     Vidya Prakashan Mandir P. Ltd. v. CIT (2018) 65 ITR 26 (Delhi) (Trib.)

174. S.263 : Commissioner – Revision of orders prejudicial to revenue – Land development expenditure – Explanation 2 to S. 263 insert by the FA 2015 (which confers power upon the CIT to revise assessments where inadequate inquiries have been conducted by the AO) is prospective in nature and does not apply even to a case where the CIT passed the order after Explanation 2 came on the statute – Revision is held to be not valid unless the CIT demonstrate that the view taken by the AO is unsustainable in law

     Allowing the appeal of the assessee the Tribunal held that Explanation 2 to s. 263 inserted by the FA 2015 (which confers power upon the CIT to revise assessments where inadequate inquiries have been conducted by the AO) is prospective in nature and does not apply even to a case where the CIT passed the order after Explanation 2 came on the statute The CIT should show that the view taken by the AO is unsustainable in law. The action of the CIT in directing the AO to conduct enquiry in a particular manner is contrary to the law interpreted in CIT v. Goetze (India) Ltd. (2014) 361 ITR 505 (Delhi)(HC). If such course of action is permitted, the CIT can find fault with each and every assessment order without making any enquiry or verification in order to establish that the assessment order is not sustainable in law. (ITA No. 3125/Mum/2017, dt. 19-1-2018)(AY. 2012-13)

     Indus Best Hospitality & Realtors Pvt. Ltd. v. PCIT (Mum.)(Trib.), www.itatonline.org

175. S.271(1)(c) : Penalty – Concealment – When penalty notice did not specify which limb of section 271(1)(c) penalty proceedings had been initiated i.e., whether, for concealment of particulars of income or furnishing of inaccurate particulars, penalty should be deleted

     During the assessment proceedings, the AO made disallowance of certain expenses and thereby issued notice for penalty under section 271(1)(c) of the Act. The CIT(A) upheld the levy of penalty by AO. Aggrieved, the assessee filed an appeal before the Tribunal.

     Before the Tribunal, assessee submitted that no specific allegation as to the concealment of particulars of income or furnishing of inaccurate particulars has been levied by the AO in the notice issued by him under section 274 r.w.s 271(1)(c) of the Act which clearly shows that the same is the standard format of the notice and AO has just ticked on the option of concealment of income or furnishing inaccurate particulars of such income.

     The Hon’ble Tribunal held that the AO has initiated the penalty without specifying specific charge i.e. whether it is for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. The notice issued by the AO under section 271(1)(c) read with section 274 of the Act is bad in law as it does not specify which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars. Therefore, the penalty in dispute is not sustainable in the eyes of law, hence the Tribunal deleted the penalty.

     Om Logistics Ltd. v. ITO ( 2018) 63 ITR 1 (Delhi) (Trib.)

176. S.271(1)(c) : Penalty – Concealment – Where quantum appeal has been restored back to the file of the Assessing Officer no penalty can be levied since the quantum order itself does not survive [S. 253]

     The assessee had filed an appeal against the quantum order before the ITAT and the tribunal had restored the matter back to the file of the AO. However, this fact was not intimated by the Assessee to the AO during penalty proceedings and AO had levied penalty on account of the additions made in the quantum order. Before CIT(A) as well the fact that quantum order has been set aside was not disclosed by the assessee and the penalty was confirmed by CIT(A).Aggrieved the assessee filed an appeal before Tribunal. The ITAT held that once quantum order was not in existence, on the basis of that order no penalty could be levied. The Tribunal noted that the penalty order was passed by the authorities below inadvertently on account of miscommunication or oversight of actual facts. Accordingly, the penalty was deleted by the Tribunal.

     Paramjit Singh v. ITO (2018) 52 CCH 290 (Amritsar) (Trib.)

177. S.271(1)(c) : Penalty – Concealment – notice issued without striking out irrelevant words – shows non application of mind – penalty not sustainable

     The penalty provisions of section 271(1)(c) of the Act are attracted where the assessee had concealed the particulars of income or furnished inaccurate particulars of such income. The two limbs of section 271(1)(c) carry different meanings. Therefore, it is imperative for the AO to strike off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The standard pro forma of notice under section 274 without striking off the irrelevant clauses would lead to an inference of non-application of mind by the A.O. (A.Y. 2007-08)

     Bhubaneswar Development Authority v. Dy. CIT (2018) 62 ITR 290 (Cuttack)(Trib.)

178. S.271(1)(c) : Penalty – Concealment – Where the AO levied penalty u/s. 271(1)(c) but did not specify under which limb had the penalty been imposed i.e., whether it was on account of concealment of income or for furnishing of inaccurate particulars of income, then penalty was not sustainable

     Tribunal held that no proper charge was levied by the AO at any of the three stages i.e. while passing the assessment order, while issuing the jurisdictional penalty notice and while passing the penalty order. Relying on the Apex Court’s Judgment in the case of CIT vs. SSA’s Emerald Meadows (2016) 386 ITR (St.) 13 (SC) wherein it was held that jurisdictional notice issued by AO u/s. 274 r.w.s 271(1)(c) of the Act was bad in law, as it did not specify that under which limb of section 271(1)(c) of the Act were penalty proceedings initiated. The Tribunal concluded that the AO’s act was a serious lapse in not fixing the charge clearly, while assuming jurisdiction to levy penalty and hence, levy of penalty was not justified. (ITA No. 5006/Del/2013) (A.Y. 1997-98)

     Aditya Chemicals Ltd. v. ITO (2018) 62 ITR 150 (Delhi) (Trib.)

179. S.271(1)(c) : Penalty – Concealment – The AO cannot initiate penalty on the charge of ‘concealment of particulars of income’, but ultimately find the assessee guilty in the penalty order of ‘furnishing inaccurate particulars of income’ (and vice versa). In the same manner, he cannot be uncertain in the penalty order as to concealment or furnishing of inaccurate particulars of income by using slash between the two expressions. Such error is not procedural but goes to the root of the matter and is not saved by S. 292B. The error renders the penalty order unsustainable in law [S.292B]

     The following point of difference has been referred to me by the Hon’ble President under section 255(4) of the Income-tax Act, 1961 (hereinafter also called as ‘the Act’) :

     “Whether, in case where the satisfaction of the AO while initiating penalty proceedings u/s. 271(1)(c) of the Income-tax Act, 1961 is with regard to alleged concealment of income by the assessee, whereas the imposition of the penalty is for ‘concealment/furnishing inaccurate particulars of income’, the levy of penalty is not sustainable?”

     The third member held that the question posed is, therefore, answered in affirmative to the effect that where the satisfaction of the AO while initiating penalty proceedings u/s. 271(1)(c) of the Income-tax Act, 1961 is with regard to alleged concealment of income by the assessee, whereas the imposition of the penalty is for ‘concealment/furnishing inaccurate particulars of income’, the levy of penalty is not sustainable.

     Accordingly the Registry of the Tribunal is directed to list these appeals before the Division Bench for passing an order in accordance with the majority view. (ITA Nos. 554, 555, 510 & 556/Asr/2014, dt. 7-5-2018) (AYs. 2008-09, 2009-10)

     HPCL Mittal Energy Ltd. v. ACIT (TM)(Amritsar)(Trib.) www.itatonline.org

180. S.271(1)(c) : Penalty – Concealment – Mistake of Tax Practitioner – Human error – Reasonable cause – Penalty deleted

     A wrong claim does not amount to furnishing of inaccurate particulars. It can only be described as a human error to which we are all prone to make and cannot be considered to be guilty of either furnishing inaccurate particulars or attempting to conceal the income. (ITA No. 3340/Mum/2016 (AY. 2008-09)

     Jagat Lodha v. ACIT (Mum.) (Trib.)

181. S.271(1)(c) : Penalty -Concealment – Bogus purchases – Levy of penalty was held to be not justified

     The Tribunal held that the addition was made on the basis of the incriminating statement of third party recorded under section 132(4) without furnishing the same to the assessee. The assessee having chosen not to file any appeal against the addition in view of smallness of amount and in the wake of its claim of huge loss, in the return, levy of penalty under S. 271(1)(c) is not sustainable, more so, as the assessee had filed necessary documents to substantiate the genuineness of purchases. (AY. 2010-11)

     Balaji Motion Pictures Ltd. v. Dy. CIT (2018) 191 TTJ 641 /61 ITR 421 (Mum.)(Trib.)

182. S.271(1)(c) : Penalty – Concealment – Additional ground – Omission to strike off the relevant clause in the notice issued under section 271 r/w. section 271(1)(c) is a legal issue hence require to be admitted. No striking of the irrelevant clause in the notice clearly brings out the diffidence on the part of AO and no clear and crystallised charge has been conveyed to the assessee under S.271(1)(c), which has to be met by it. Proceedings suffer from non-compliance with principles of natural justice. Consequently, the penalty imposed was deleted [S.254(1).

     Tribunal held that omission to strike off the relevant clause in the notice issued under section 271 r/w. section 271(1)(c) is a legal issue hence require to be admitted. The Tribunal also held that no striking of the irrelevant clause in the notice clearly brings out the diffidence on the part of AO and no clear and crystallised charge has been conveyed to the assesse under section 271(1)(c), which has to be met by it. Proceedings suffer from non-compliance with principles of natural justice. Consequently, the penalty imposed under section 271(1)(c) is deleted. (AYs. 1997-98, 1999-2000, 2004-05)

     Auto Riders India (P) Ltd. v. ACIT (2018) 191 TTJ 376 (Mum.)(Trib.)

183. S.271AAB : Penalty – Search – Levy of penalty on the basis of loose sheets found on the course of search was held to be not justified as loose sheets represented only projection [S. 132(4)]

     Dismissing the appeal of the revenue the Tribunal held that levy of penalty on the basis of loose sheets found in the course of search was held to be not justified as loose sheets represented only projection. (AY. 2013-14)

     ACIT v. Marvel Associates. (2018) 170 ITD 353 (Visakh) (Trib.)

184. S.271D : Penalty – takes or accepts any loan or deposit –Representative of the assessee consented to the proposition that apart from the bona fides of the transaction, assessee is also required to prove the existence of reasonable cause to come within the immunity provided in S. 273B of the Act, Accordingly the Tribunal has not dealt any further with the reservations expressed by the Division Bench in the reference note. Accordingly on facts the assessee has failed to show that there was a reasonable cause for getting loans in violation of the provisions of S. 269SS of the Act. Levy of penalty is held to be justified. [Ss. 269SS, 273B]

Tribunal held that since the learned representative for the assessee consented to the proposition that apart from the bona fides of the transaction, assessee is also required to prove the existence of reasonable cause to come within the immunity provided in S. 273B of the Act, we do not dwell upon any further with the reservations expressed by the Division Bench in the reference note. Tribunal referred the Judgment of Apex Court in ADIT (Inv.) v. Kum. A.B. Shanthi (2002) 255 ITR 258 (SC). This was expressed before the parties, who thereafter have made submissions on merits. Accordingly the Tribunal held that the assessee has failed show that there was any urgent business necessity and hence the assessee was constrained to take loans by way of cash. In view that the assessee has failed to show that there was a reasonable cause for getting loans in violation of the provisions of S. 269SS of the Act. Accordingly we are of the view that the learned CIT(A) was justified in confirming the penalty of ` 2.00 lakh imposed by the assessee. (ITA No. 6304/Mum/2012, dt. 13-6-2018)(AY. 2008-09)

Deepak Sales & Properties Pvt. Ltd. v. ACIT (2018) 95 taxman.com 162 (Mum.)(Trib.)(SB), www.itatonline.org