S.2(22)(e) : Deemed dividend –loans from two companies addition cannot be made as deemed dividend
Dismissing the appeal of the revenue the Court held that the assessee had not made any payment by way of advance or loan to a shareholder, but on the contrary, had received loans from the two companies. Therefore, if at all, the provisions of section 2(22)(e) were applicable to the companies which had made such payments, provided the assessee had the requisite shareholding. The assessee being the recipient of such amounts, the Tribunal was justified in holding that the provisions of section 2(22)(e) could not be invoked. No question of law arose. (AY. 2010-11)
CIT v. Gladder Ceramics Ltd. (2018) 401 ITR 205 (Guj.) (HC)
S.4 : Charge of income-tax – Capital or revenue – Sales tax subsidy is a capital receipt [S. 264]
Allowing the petition against order u/s. 264 the Court held that the sales tax subsidy received by the assessee was to be treated as a capital receipt and was not to be added to its income. The orders of the Commissioner and the Assessing Officer, treating the sales-tax subsidy as revenue receipt, were to be set aside. (AYs. 2007-08 to 2010-11)
Sunbeam Auto Pvt. Ltd. v. CIT (2018) 402 ITR 309 (Delhi) (HC)
S. 4 : Charge of income-tax – VAT subsidy – Refund of value added tax was held to be capital receipt and not chargeable to tax [Ss. 2(24)(xviii), 43(1)]
Dismissing the appeal of the revenue the Court held that refund of value added tax subsidy from Government of Bihar was held to be capital receipt and not chargeable to tax.
CIT v. Deepak Vegpro Pvt. Ltd. (2018) 401 ITR 89 (Raj.) (HC)
S.10 (23C) : Educational institution – Application for exemption was made before wrong authority – Authority concerned should have forwarded to the correct authority instead of rejecting the said application after enquiries [S. 10(23C)iv)]
Allowing the petition the Court held that when the assessee filed the application before the wrong authority, it should have been returned. Instead of returning the assessee’s application, an enquiry was held and additional material was sought, thereby making the assessee believe that its application was pending consideration. Therefore, on the facts of the case, the blame was equally apportionable to both parties. If the assessee were entitled to exemption on merits, it would be iniquitous to deny consideration of its application, merely because it was not addressed to the correct authority. Therefore, it would be in the fitness of things, if the application dated September 30, 2015, filed by the assessee were treated as the one filed before the competent authority, i.e., the Commissioner (E). The Assistant Commissioner (E) was to forward the application filed by the assessee for exemption in Form 56 along with the enclosures to the Commissioner (E) and the Commissioner (E) shall hold an enquiry, pass an appropriate order and communicate it to the assessee. (AY. 2015-16)
Telangana State Pollution Control Board v. CIT (2018) 402 ITR 267 (T&AP) (HC)
S.10B : Export oriented undertakings – Manufacture or processing – Garbling pepper to make it edible – No new product emerges – Not entitled to deduction
Dismissing the appeals, that the process of garbling to make pepper edible did not give rise to a different commodity distinct from the raw pepper purchased. The assessee was not entitled to deduction under section 10B (AY. 2003-04, 2005-06)
Nishant Export v. ACIT (2018) 401 ITR 401 (Ker.) (HC)
S.11 : Property held for charitable purposes – Propagation of yoga falls under category of ‘Imparting of education’ – Corpus donation to be excluded from total income – Higher membership fee is also donation hence cannot be assessed as income [Ss. 2(15, 2(24(iia), 4]
Dismissing the appeal of the revenue the Court held that propagation of yoga by way of conducting yoga classes on a regular basis and in a systemised manner falls under category of ‘Imparting of education’ . Corpus donation was to be excluded from total income. Higher amount from certain subscribers/donors in yoga camps who were provided corresponding benefits as opposed to others, that by itself could not be basis for holding that membership fee was not a donation and had to be treated as income liable to tax. (AY. 2009-10).
CIT(E) v. Patanjali Yogpeeth (NYAS) (2018) 252 Taxman 317 / 300 CTR 266 (Delhi)(HC)
S.12AA : Procedure for registration – Trust or institution – Genuineness of activities of the assessee was not doubted hence refusal of registration was held to be not justified [S. 12A]
Dismissing the appeal of the revenue the Court held that it was rightly concluded by the Tribunal that the Commissioner was not justified in rejecting the application for registration, under section 12AA, of the assessee-society by insisting on conditions not contemplated by the statute. The Department had not been able to produce any material on record to show that the approach adopted by the Tribunal was legally unsustainable or to show that the view taken by it was erroneous. No question of law arose.
CIT v. Shri Mahavir Jain Society (Regd.) (2018) 402 ITR 301 (P&H)(HC)
S.12AA : Procedure for registration – Trust or institution – Rejection of application for failure to produce Trust deed was held to be not justified, when the assessee was registered under State Wakf Board [R. 17A]
Dismissing the appeal of the revenue the Court held that the factum of existence of a trust could also be established by producing documents evidencing its creation. The order passed by the Wakf Board recognised various Daudi Vora Trusts and the assessee had also listed its objects, who would be the managers of the trust and how such managers would be appointed or removed. The Tribunal had gone through the registration details of the assessee as contained in the order of the Wakf Board and was satisfied that the full details of the functions of the trust were available which established the existence of the trust, its registration by the State Wakf Board and also contained the details of its objects, the manner of appointment of mutawalli, etc. The Tribunal was right in holding that looking to the nature of the assessee-trust no separate trust deed was required for registration under section 12AA as it was registered with the State Wakf Board.
CIT v. Dawoodi Bohra Masjid (2018) 402 ITR 29 (Guj.) (HC)
S.12AA : Procedure for registration – Trust or institution – Alleged misuse of funds is not a ground for refusing registration [Ss.11, 12A]
Dismissing the appeal of the revenue the Court held that alleged misuse of funds is not a ground for refusing registration.
CIT v. Chaudhary Son Pal Singh (2018) 401 ITR 509 (All.) (HC)
S.28(i) : Business loss – Fluctuation in rate of exchange in case of loans utilised for working capital of the business is held to be allowable expenditure [S.37(1)]
Dismissing the appeal of the revenue the Court held that fluctuation in rate of exchange in case of loans utilised for working capital of the business is held to be allowable expenditure. Relied CIT v. Woodward Governor India Pvt. Ltd. (2009) 312 ITR 254 (SC) (ITA No. 806 of 2015 dt.26-2-2018)(AY. 2009-10)
PCIT v. Aloka Exports (Bom)(HC) (2018) BCAJ -May. 62
S.35AB : Know-how – Acquiring know-how means acquiring on ownership basis or on lease deduction cannot be allowed as revenue expenditure [S.37(1)]
Question for consideration was “Whether on the facts and the circumstances of the case and in law, the Tribunal was right in law to hold that the assessee had acquired the ownership rights in the technical knowhow included in the agreement in contradistinction to lease of rights in such knowhow and accordingly the assessee was entitled to deduction under section 35AB as against under Section 37(1) of the Act?
Court held that on the application of law to the facts in the present facts, the expenditure on account of technical know-how incurred under the agreement dated 19th June, 1984 is classifiable under S.35AB of the Act and not under S.37(1) of the Act. Therefore, question is answered in the affirmative in favour of the respondent Revenue and against the applicant assessee.
(Dy. CIT v. Anil Starch Products Ltd. (2015) 232 Taxman 129 (Guj.)(HC) and Diffusion Engineers Ltd. v. Dy. CIT (2015) 376 ITR 487 (Karn.)(HC) (based on CIT v. Swaraj Engines Ltd. (2008) 301 ITR 284 (P&H)(HC) dissented from) (ITR No. 13 of 2001, dt. 27-4-2018) (AY. 1986-87).
Standard Batteries Ltd. v. CIT (Bom.)(HC), www.itatonline.org
S.37(1) : Business expenditure — Expenditure in excess of 6 per cent of initial issue expenses of asset management company was held to be deductible. Expenditure relating to Information Technology Infrastructure was also held to be allowable. [Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, R. 52]
Reading the proviso to Regulation 52 of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, it is manifest that any excess over the 6 per cent initial issue expense shall be borne by the asset management company, therefore expenditure in excess of 6% of initial issue expenses of asset management company was held to be deductible. Expenditure relating to Information Technology infrastructure was held to be allowable (AY. 2006-07).
CIT v. Ing Investment Management (India) P. Ltd. (2018) 401 ITR 405 (Bom.) (HC)
S.40(a)(ia) : Amounts not deductible – Deduction at source – Proviso excepting assessee from disallowance where payee has declared payment in his return and paid tax thereon is retrospectively applicable, hence no disallowance can be made [S. 201(1)].
Dismissing the appeal of the revenue the Court held that the second proviso to section 40(a)(ia) of the Income-tax Act, 1961 introduced by the Finance Act, 2012 (which provides that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B but is not deemed to be an assessee-in-default under the first proviso to section 201(1), i.e., the payee has filed a return taking into account such sum for computing his income, has paid the tax due on such income declared and furnishes a certificate to this effect from an accountant, the assessee shall not be subject to disallowance in respect of such sum) has retrospective application (AY. 2009-10).
CIT v. Manoj Kumar Singh. (2018) 402 ITR 238 (All.) (HC)
S.40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits – Payment made to producer of meat in cash in excess of ₹ 20,000/ disallowance cannot be made [R.6DD]
Dismissing the appeal of the revenue the Court held that, payment made to producer of meat in cash in excess of ₹ 20000/ disallowance cannot be made. Circular No. 8 of 2016 issued by CBDT cannot impose additional condition in the Act or Rules adverse to an assessee. Relied UCO Bank v. CIT (1999) 237 ITR 889 (SC) (ITA No. 1224 of 2015 dt. 13-3-2018) (AY. 2009-10)
PCIT v.Gee Square Exports (Bom)(HC) (2018) BCAJ -May. 61
S.45 : Capital gains – Transfer –Power of Attorney was executed in the year 1993-94 but actual possession was given in the year AY. 2003-04, capital gains was held to be taxable in the year of handing over of possession [S. 27(v), Transfer of Property Act, 1882, S.53A]
Dismissing the appeal of the assessee the Court held that the agreement dated April 30, 2001 referred to some oral agreement and powers of attorney executed between the assessees and the developer, but the fact remained that the agreement dated April 30, 2001 recorded that the assessees were the owners and in possession of the property. The power of attorney of the year 1993-94 did not disclose that possession was given to the developer in pursuance of the power of attorney. Moreover, the assessees in their reply to the notice stated that the assessees had not given possession to the developer but had given only access to enable him to do certain jobs on their behalf. It had also been stated in the reply that the assessees continued to be full owner of the property and there was no transfer. Therefore, the transfer within the meaning of section 2(47)(v) had taken place only in the assessment year 2002-03, since, by agreement dated April 30, 2001, actual possession was given to the developer and it was not given on the basis of the powers of attorney and oral agreements entered into between the assessees and the developer in the year 1993-94 (AY. 2002-03).
Dr. Joao Souza Proenca. v. ITO (2018) 401 ITR 105/ 253 Taxman 275 (Bom.) (HC)
Sara Proenca (Mrs.) v. ITO (2018) 401 ITR 105/ 253 Taxman 275 (Bom) (HC)
S.45: Capital gains – Search – Additions cannot be made on the basis of statement of third parties, when no incriminating documents were found in the course of search action on the assesse [Ss.132(4) 158BA].
Dismissing the appeal of the revenue the Court held that the Tribunal held that the search action had not resulted in recovery of incriminating evidence or undisclosed investment in any form including deposits in bank accounts and that an unsigned agreement which was disowned by both parties, not supported by any evidence could not be relied upon to make addition. It further held that an addition could not be made solely on the basis of surrender made during the course of search or survey in the absence of corroborative evidence in support and deleted the addition.
CIT v. Prabhati Lal Saini. (2018) 401 ITR 228 (Raj.) (HC)
S.45 : Capital gains – Transfer – Development agreement was not registered hence there was no transfer, therefore not liable to capital gains tax [S. 2 (47)(v), Transfer of Property Act, 1882, S.53A]
Dismissing the appeal of the revenue the Court held that on facts as the development agreement was not registered, there was no transfer, therefore not liable to capital gains tax (AY. 2008-09).
PCIT v. Ranjit Kaur (2017) 81 taxmann.com 319 (P&H) (HC)
Editorial: SLP of revenue was dismissed, PCIT v. Ranjit Kaur (2018) 252 Taxman 382 (SC)
S.54B : Capital gains – Land used for agricultural purposes – Investment in the name of wife was held to be entitled to exemption. The words used are the assessee has to invest, it is not specified that it is to be in the name of assessee. Expenditure on bore wells and stamp duty to be taken into consideration while considering the exemption [S. 263]
Allowing the appeal of the assessee the Court held that investment in the name of wife was held to be entitled to exemption. The words used are the assessee has to invest, it is not specified that it is to be in the name of assessee. Expenditure on bore wells and stamp duty to be taken in to consideration while considering the exemption.
Laxmi Narayan v. CIT (2018) 402 ITR 117 (Raj.) (HC)
Shravan lal Meena L/H of Late Bhagwanta Meena v. ITO (2018) 402 ITR 117 (Raj.) (HC)
Mahadev Balaji v. ITO (2018) 402 ITR 117 (Raj.) (HC)
S.68 : Cash credits – Not required to explain source of source – Confirmation letters, affidavits PAN No. was filed, deletion of addition was held to be justified
Dismissing the appeal of the revenue the Court held that the assessee is not required to explain the “source of source” prior to insertion of the proviso to s. 68. If the assessee has discharged the primary onus placed upon it u/s. 68 by filing confirmation letters, the affidavits, the full address and pan numbers of the creditors, the Revenue has to proceed against the persons whose source of funds are alleged to be not genuine (ITA No. 819 of 2015, dt. 17-4-2018)(AY. 2010-11).
PCIT v. Veedhata Tower Pvt. Ltd. (Bom.)(HC), www.itatonline.org
S.68 : Cash credits – Share application money – Merely on the basis of statement given by directors of investing companies additions cannot be made when the assessee has provided all necessary evidences – Burden is on revenue to prove otherwise
Dismissing the appeal of the revenue the Court held that; the lone circumstance of a director disowning the document itself could not have constituted fresh material to reject the documentary evidence. The existence of the company as an Income-tax assessee and that it had furnished audited accounts was not in dispute. Furthermore, its bank details too were furnished to the Assessing Officer. If the Assessing Officer were to conduct his task diligently, he ought to have at least sought the material by way of bank statements, etc., to discern whether in fact the amounts were infused into the shareholder’s account in cash at any point of time or that the amount were such as to be beyond their means. The Assessing Officer failed to do so. The Tribunal rightly set
aside the addition made under section 68 of the Act.
CIT v. Oriental International Co. P. Ltd. (2018) 401 ITR 83 (Delhi) (HC)
S.68 : Cash credits – Firm or AOP – First year of business no addition can be made
Dismissing the appeal of the revenue the Court held that since it was first year of business of AOP and no business activity having been shown to have been conducted by it that could lead to generation of unaccounted income on first day of relevant accounting period itself, Tribunal had not committed any error in deleting impugned addition (AY. 2001-02)
CIT v. Lal Mohar (2017) 252 Taxman 401 (All.)(HC)
S.69B : Amounts of investments not fully disclosed in books of account – Valuation of closing stock for availing of facilities from bank – Quantity of stock remaining same additions cannot be made. [S. 143(3)]
Dismissing the appeal of the revenue the Court held that there was no difference between the quantity of stock as shown in the books of account and in the statement submitted to the bank. The conclusions arrived at by them did not suffer from any legal infirmity. The deletion of addition made under section 69B was proper.(AY. 2010-11)
CIT v. Gladder Ceramics Ltd. (2018) 401 ITR 205 (Guj.) (HC)
S.69C : Unexplained expenditure – Disallowances cannot be made merely on the ground that parties to whom payments were made not appeared before the AO in response to summons, when the assessee has furnished PAN numbers, TDS was deducted and details of the bank was furnished [S. 131]
Dismissing the appeal of the revenue the Court held that disallowances cannot be made merely on the ground that parties to whom payments were made not appeared before the AO in response to summons, when the assessee has furnished PAN numbers, TDS was deducted and details of the bank was furnished. Court also held that Tribunal correctly held that it is not possible for the assessee to compel the appearance of the parties before the AO. (ITA No. 1103 of 2015 dt. 28-2-2018) (AY. 2009-10).
PCIT v. Chawla Interbild Construction Co. Pvt. Ltd. (Bom.) (HC) (2018) BCAJ -May. 63
S.80IA : Industrial undertaking – Infrastructure facility – Container Freight Station (CFS) is eligible deduction as an infrastructure facility – Strictures passed against Dept’s Advocate for “most unreasonable attitude” of seeking to reargue settled concluded issues and not following the judicial discipline and law of precedents [S. 260A]
The issue involved was whether the Container Freight Station (CFS) is eligible deduction as infrastructure facility. Though the issue is covered by Jurisdictional High Court in CIT v. Continental Warehousing Corporation (Nava Sheva) (2015) 374 ITR 646 (Bom) (HC) and also All Cargo Logistics Ltd. v CIT (ITA Nos. 5018 to 5022 and 5059 dt. 6th July 2012, the revenue wanted to argue the matter once again. Dismissing the appeal of the revenue the Court has passed, strictures passed against Dept’s Advocate for “most unreasonable attitude” of seeking to reargue settled concluded issues and not following the judicial discipline and law of precedents. (ITXA-613-2015 ITXA-618-2015 (SR.3), dt. 11-4-2018)(AY. 2008-09, 2009-10)
PCIT v. JWC Logistics Park Pvt. Ltd. (Bom.)(HC), www.itatonline.org
S.80IB : Industrial undertakings – Activity of supplying the audio of the background sound to the film already shot by customers is manufacture and entitle to deduction
On appeal the High Court held, following the principle laid down in CIT v Oracle Software India Ltd (2010)320 ITR 546 (SC) and considering the facts that (i) the activity of video software generation has been recognised as small scale industries by Government of India and (ii) providing the audio software to the video already shot makes an article fit for use, it tantamount to manufacture within the meaning of provisions of S. 80IB of the Act (ITA No. 108 of 2012, dt. 8-8-2017) (AY. 2001-02).
Vijay Kumar v CIT (2018) 161 DTR 278 /300 CTR 254 (J&K)(HC)
S.80IB : Industrial undertakings – Manufacture – Process of galvanisation amounted to ‘manufacture’ since the resultant product is a different commercial commodity having distinct use and is sold at a higher price
Allowing the appeal of the assessee the Court held that process of galvanisation amounted to ‘manufacture’ since the resultant product is a different commercial commodity having distinct use and is sold at a higher price (AY. 2001-02).
Kashmir Tubes v. ITO (2017) 85 taxmann.com 299 (2018) 300 CTR 541 (J&K) (HC)
S.80P : Co-operative societies –Entitle deduction – Co-operative Society is not a Credit Co-Operative Bank [S.80P(2)(a)(i)(4)]
Dismissing the appeal of the revenue the Court held that; the exclusion clause of sub-section (4) of section 80P did not apply to the assessee the assessee being co-operative society is entitled to deduction (AY. 2010-11)
CIT v. Ekta Co-op. Credit Society Ltd. (2018) 402 ITR 85 (Guj.) (HC)
S.92C : Transfer pricing – Arm’s length price – Interest on loan to associated enterprise – Rate of interest being charged in the country where the loan is received or consumed
Dismissing the appeal of the revenue, the Court held that, in case of loans advanced to associated enterprise would determined on the basis of rate of interest being charged in the Country where the loan is received/consumed. On facts the assessee has got the loan at 4.79 per cent and has advanced the loan to its AE at 7.3 per cent and the very basis of the order of TPO was on wrong premise. i.e. It has considered the rate as prevailing in India, the Tribunal has considered the facts of the present case in a plausible manner.
CIT v. The Great Eastern Shipping Co. Ltd. (2018) 301 CTR 662 (Bom)(HC)
S.92CB : Transfer Pricing – Safe Harbour Rules – AO has no authority to make any reference to the TPO to ascertain the arm’s length price of the assessee’s specified domestic transactions. CBDT’s circular dated 10-3-2006 could not have and does not lay down anything to the contrary [Ss. 92C, 92CA]
Allowing the petition the Court held that if the assessee has exercised the safe harbour option under Rule 10THD(1) & the AO has not passed any order under Rule 10THD(4) declaring the exercising of option to be invalid, the option is treated as valid. Thereafter, the Transfer Pricing regime does not apply & the AO has no authority to make any reference to the TPO to ascertain the arm’s length price of the assessee’s specified domestic transactions. CBDT’s circular dated 10-3-2006 could not have and does not lay down anything to the contrary. Accordingly, reference made by the Assessing Officer to the TPO in the present case is quashed. Resultantly, the order dated 15-9-2017 passed by the TPO on such invalid reference is set aside (Special Civil Application No. 19073 of 2017, dt. 6-3-2018) (AY. 2014-15)
Mehsana District Co-operative v. DCIT (Guj.)(HC), www.itatonline.org
S.119 : Central Board of Direct Taxes – Powers – Condonation of delay in making investment – Power must be exercised in a judicious manner – Order of CBDT was set aside [S. 54EC, Art. 226]
Allowing the petition the Court held that delay of six months deserved to be condoned in view of the fact that the assessee, a doctor by profession was travelling from India to the
U. S. A. where she normally resided and came to India not only to meet her family members, but to sell the immovable property belonging to her and sought to avail of the genuine exemption from such tax liability upon making the investment in the prescribed investment in the form of bonds of infrastructure which she did make in the National Highways Authority. Accordingly the CBDT was directed to grant exemption (AY. 2013-14).
Dr. Sujatha Ramesh (Smt.) v. CBDT (2018) 401 ITR 242 (Karn.) (HC)
S.119 : Central Board of Direct Taxes – Refund – Application for condonation of delay in filing return of income and claiming refund of TDS – PCIT rejected the application on merits of claim / extent of exemption and not considering the criteria required to be satisfied by assessee-trust – Impugned order is set-aside to the file of PCIT for fresh disposal [Ss.237, 264]
HELD, by the High Court that the impugned rejection order does not deal with the various criteria which the assessee were asked to satisfy for consideration of its application ie specific evidence/test laid down by CBDT as indicated in PCIT’s notice has not been dealt with in respect to each of the heads. Order set aside to the file of PCIT for fresh disposal and considering the parameters indicated in PCIT’s notice (W.P. No. 2301 of 2017 dt. 18-1-2018) (AY. 2014-15)
Yash Society v. CIT (E) (2018) 163 DTR 337/301 CTR 729 (Bom)(HC)
S.139 : Return of income – When assessee took advantage of provisions of section 139(5), could not say that it was non est [S.10B, 139(5)]
Dismissing the appeal the Court held that when assessee took advantage of provisions of section 139(5), could not say that it was nonest. When Commissioner (Appeals) rejected assessee’s claim under section 10BA, assessee filed revised return under section 139(5) pending his appeal before Tribunal which was decided in favour of assessee. Immediately assessee sought to withdraw revised return to avail benefit of section 10BA which was held to be not justified (AYs. 2005-06 to 2007-08).
Amit Basu v. Dy. CIT (2018) 252 Taxman 314 (Raj.)(HC)
S.142(2A) : Inquiry before assessment – Special audit – Order passed without application of mind and objections of the assessee was held to be bad in law [S.142]
Allowing the petition the Court held that the orders neither disclosed the discussion on the objections of the assessee to the special audit and at least in one case for the assessment year 2013-14, the assessing authority did not even wait for the objections to be placed on record and before they were furnished on March 29, 2016, he had already passed the order on March 28, 2016 while the limitation for passing the assessment order was expiring on March 31, 2016. The orders under section 142(2A) could not be sustained (AY. 2013-14, 2014-15).
Karnataka Industrial Area Development Board v. CIT (2018) 401 ITR 74 / 162 DTR 73/ 300 CTR 449/ 253 Taxman 178 (Karn.) (HC)
S. 143(2) : Assessment – Notice issued within period of limitation, however the notice was served beyond limitation period hence the assessment was held to be in valid and quashed [S. 143(2)]
Dismissing the appeal of the revenue the Court held that even though revenue authorities issued notice under section 143(2) within period of limitation as prescribed in proviso to section 143(2), yet same was served on assessee after limitation period, it was to be regarded as invalid notice and, thus, assessment proceedings initiated in pursuance of said notice deserved to be quashed.
CIT v. V. V. Devassy (2018) 252 Taxman 390 (Ker.)(HC)
S.143(3) : Assessment – Capital gains — Capital gains wrong shown in the return as taxable – Duty of Assessing Officer to refrain from assessing such income – No tax shall be levied or collected except by authority of law. [S.45, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, S.96, Art. 265]
Allowing the petition the Court held that, merely because the assessee has shown capital gains as taxable in the return, the same cannot be taxed if it is not taxable. It is the duty of the Assessing Officer to refrain from assessing such income. Under Article 265 of the Constitution the powers of the Assessing Officers under the Act are quasi-judicial in nature and they are duty-bound, therefore, to act fairly in the discharge of their functions. They are also invested with the authority to do justice to the assessees. In a case where it is apparent on the face of the record that the assessee has included in his return, an income which is exempted from payment of Income-tax, on account of ignorance or by mistake, the Assessing Officer is bound to take into account that fact in a proceeding under section 143 of the Income-tax Act, 1961. In other words, if the capital gains on a transaction are exempted from payment of tax, the Assessing Officer has a duty to refrain from levying tax on the capital gains and the Assessing Officer cannot, in such cases, refuse to grant relief under section 143 of the Act to the assessee on the technical plea that the assessee has not filed a revised return. It is so since the paramount duty of the Assessing Officer is to complete the assessments in accordance with law (AY. 2014-15).
Raghavan Nair v. ACIT (2018) 402 ITR 400 (Ker.) (HC)
S.145 : Method of accounting – Mere non-maintainence of stock register could not form the basis of rejection of books of account
Allowing the appeal of the assessee the Court held that there was no findingby the AO that the books of account were not correctly maintained. The mere non-maintenance of the stock register cannot form the basis of rejection of the assessee’s books of account. As rightly pointed out by the assessee, although a separate stock register may not have been maintained, a physical verification of the stock on yearly basis was undertaken and was reflected in the balance sheet of the assessee. In a large number of decisions, including Pandit Bros v. CIT  26 ITR 159 (Punj. & Har.)(HC) Bombay Cycle Stores Co. Ltd. v. CIT  33 ITR 13 (Bom.)(HC) and S. Veeriah Reddiar v. CIT  38 ITR 152 (Ker.)(HC), it has been held that the mere non- maintenance of stock register would not lead to the conclusion that profit of the assessee could not be determined on the basis of the books of account maintained by it (AY. 1999-2000).
Maruti udyog Ltd v. CIT (2018) 253 Taxmann 60 (Delhi) (HC )
S.145 : Method of accounting –Rejection of accounts was held to be not justified on the basis that the goods are sold at the price lower than the market price or purchase price – Law cannot oblige or compel a trader to make or maximise its profits [S.145(3)]
Dismissing the appeal of the revenue, the Court held that rejection of accounts was held to be not justified on the basis that the goods are sold at the price lower than the market price or purchase price – Law cannot oblige or compel a trader to make or maximise its profits. Relied CIT v. A. Raman & Co. (1968) 67 ITR 11 (SC) S.A. Builders Ltd. v. CIT (2006) 288 ITR 1 (SC). (ITA No. 813 of 2015 dt. 20-2-2018) (AY. 2005-06).
PCIT v. Yes Power and Infrastructure Pvt. Ltd. (Bom) (HC) (2018) BCAJ -May. 63
S.147 : Reassessment – After the expiry of four years – Agricultural income – Change of opinion – Objection was disposed without speaking order – Notice for reassessment only for the relevant year and there were hundreds of coffee growers whose income were also exempted, reopening notice issued only against assessee during relevant assessment year was unjustified [Ss.10(1), 148]
Allowing the petition the Court held that , since reassessment order was passed without disposing of assessee’s objections to reopening of assessment and without passing a speaking order, same was unjustified. Court also held that where claim of assessee of exemption of income under section 10(1) on proceeds from sale of coffee subjected to only pulping and drying was accepted for several years and there were hundreds of coffee growers whose income were also exempted, reopening notice issued only against assessee during relevant assessment year was unjustified (AY. 2009-10).
Karti P. Chidambaram v. ACIT (2018) 252 Taxman 416 / 300 CTR 233 (Mad.)(HC)
S.147 : Reassessment – Within four years – Reopening of assessment by succeeding Assessing Officer to disallow excess deduction was held to be change of opinion which was held to be impermissible [Ss.80IA, 143(3) 148]
Allowing the petition the Court held that ; the assessee’s claim to deduction under section 80-IA was examined by the previous Assessing Officer minutely during the scrutiny assessment proceedings. He had given detailed reasons for reducing the claim by ₹ 3.8 lakhs and had accepted the rest of the claim. Any attempt on the part of the succeeding Assessing Officer to modify that position would be based on change of opinion. If an angle or an element of the claim had not been directly addressed by the previous Assessing Officer during the original assessment to the satisfaction of the succeeding Assessing Officer, it could not be a ground for reopening of the assessment which was previously made after scrutiny (AY. 2011-12).
Ajanta Pvt. Ltd. v. DCIT (2018) 402 ITR 72 (Guj.) (HC)
S.147 : Reassessment – Two notices – Reassessment was initiated vide two notices and the second notice was beyond prescribed period. Nowhere it was stated that second notice was in continuation of first one hence reassessment was invalid [S.143(1),148]
Allowing the petition the Court held that, no satisfactory explanation was provided as to why the first notice on March 2015 issued by the AO under S. 148 of the Act was not carried to its logical end. The mere fact that the AO who issued that notice was replaced by another AO can hardly be the justification for not proceeding in the matter. On the other hand, the AO did not seek to proceed under S. 129 of the Act but to proceed de novo under S. 148 of the Act and this was a serious error which could not be accepted to be a mere irregularity. Thus the High Court noticed that there were numerous legal infirmities which led to inevitable invalidation of all the proceedings that took place pursuant to the notice issued to the assessee first in March 2015 and then again in January, 2016 under S.148 of the Act. Thus the High Court set-aside the proceedings initiated by the AO under S. 148 of the Act (AY. 2008-09).
Mastech Technologies Pvt. Ltd. (2018)161 DTR 189 (Delhi) HC)
S.147 : Reassessment– Natural justice – Order passed without disposing of objections raised by assessee for reopening was improper and null and void [Ss. 143(2), 148]
Allowing the petition the Court held that Order passed without disposing of objections raised by assessee for reopening was improper and null and void. The law laid down by the Supreme Court is of binding nature and is a source of law unto itself, which would bind on all the authorities. Gkn Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC) lays down a law and failure to comply would render the assessment order without jurisdiction (AY. 2009-10).
Jayanthi Natarajan (Ms.) v. ACIT (2018) 401 ITR 215 / 300 CTR 225/ 161 DTR 281 (Mad.) (HC)
S.153A : Assessment – Search –Merely on the basis of third party statement without any incriminating evidence addition was held to be not justified [S. 132 (4)]
Dismissing the appeal of the revenue the Court held that the statement under section 132(4) could not bind the assessee. According to section 132(4) a presumption arose in the case of the searched party. In the case of statements by the party whose premises were searched or attributed to a third party, there had to be a connect or corroboration and there was none in the case of the assessee. No incriminating material was found in the premises of the assessee. The addition made by the Assessing Officer was unsustainable.
CIT v. Manoj Hora (2018) 402 ITR 175 (Delhi) (HC)
S.153A : Assessment – Search or requisition – When no incriminating material was found in the course of search, addition cannot be made on the basis of evidence collected after the search. No addition can be made on the basis of statement of director much later after the search [Ss. 131, 132]
Dismissing the appeal of the revenue the Court held that where no incriminating evidence was found against assessee during course of search, additions cannot be made on basis of material collected after search. Court also held that, additions cannot be made on basis of statement of director of assessee company which was recorded under section 131 much later after search (AY. 2007-08).
PCIT v. Sunrise Finlease (P.) Ltd. (2018) 252 Taxman 407 (Guj.)(HC)
S.153D : Assessment – Search and seizure – Approval – Order passed by the Assessing Officer without approval of Joint Commissioner was held to be bad in law [S. 153C]
Dismissing the appeal of the revenue the Court held that ; an assessment order under section 153C can be passed by Income Tax Officer only after obtaining prior approval under section 153D of Joint Commissioner inasmuch as compliance of section 153D requirement is absolute therefore order passed by the Assessing Officer without approval of Joint Commissioner was held to be bad in law (AY. 2007-08).
PCIT v. Sunrise Finlease (P.) Ltd. (2018) 252 Taxman 407 (Guj.)(HC)
S.179 : Private Company – Liability of Directors – Assessing Officer can exercise jurisdiction to recover the dues of the company against the director only when it fails to recover its dues from private limited company
Allowing the petition, the Court held that it is condition precedent for the AO to exercise jurisdiction under S. 179(1) of the Act that to proceed against the directors of the delinquent Private Limited Company only after it has failed to recover its dues from such company. The jurisdictional requirement cannot be said to be satisfied by a mere statement in the impugned order that the recovery proceedings had been conducted against the defaulting Private Limited Company but it had failed to recover its dues. The above statement should be supported by mentioning briefly the types of efforts made and its results. Accordingly the order was set aside (AY. 2006-07 to 2011-12).
Madhavi Kerkar v. ACIT (2018) 253 Taxman 288 (Bom.) (HC)
S.197 : Deduction at source – Certificate for lower rate – Flaw in decision making process – No Change in facts during period between grant of certificate and order cancelling certificate –Violation of principles of natural justice – Order was quashed. [S. 263 R. 28aa, Art. 226]
Allowing the petition the Court held that; if the Department sought to cancel the certificate on the ground that a particular aspect had not been considered, before taking a decision to cancel the certificate already granted, it must have satisfied the requirement of natural justice by giving a copy of the same to the assessee and heard the assessee on it before taking a decision to cancel the certificate. The notices which sought to review the certificate did not indicate that the review was being done as the certificate dated May 4, 2017 was granted without considering the applicability of Rule 28AA in the context of the assessee’s facts. Therefore, there was no occasion for the assessee to seek a copy of the reasons recorded while issuing the certificate. Moreover, it was found on facts that there was no change in the facts that existed on May 4, 2017 and those that existed when the order dated October 23, 2017 was passed. Thus, there was a flaw in the decision-making process which vitiated the order dated October 23, 2017. The grant or refusal to grant the certificate under section 197 had to be determined by the parameters laid down therein and Rule 28AA and it could not be gone beyond the provisions to decide an application. The order dated October 23, 2017 did not indicate, what the profits were likely to be in the near future, which the Department might not be able to recover as it would be more than the carried forward losses. However, such a departure from the earlier view had to be made on valid and cogent reasons. Therefore, on the facts, the basis of the order, that the financial condition of the assessee was that any further tax payable might not be recoverable, was not sustainable and rendered the order bad (AY. 2018-19).
Tata Teleservices (Maharashtra) Ltd. v. DCIT (2018) 402 ITR 384/253 Taxman 343 /163 DTR 317 /301 CTR 377 (Bom.) (HC)
S.206C : Collection at source – Scrap – Items used by the buyers in manufacturing of other items cannot be considered as scrap, hence not liable to collect tax at source
Dismissing the appeal of the revenue the Court held that assessee having imported garments, cut them into smaller pieces and sold to different parties in form of rags, wipers or chindi which were used by buyers in manufacturing other items like blankets, pillows etc., waste so manufactured would not fall within ambit of expression ‘scrap’ as envisaged in clause (b) of Explanation to S. 206C. Accordingly not liable to collect tax at source (AY 2009-10 to AY. 2013-14)
PCIT (TDS) v. Safari Fine Clothing (P) Ltd. (2018) 253 Taxman 198 (Guj.)(HC)
S.225 : Collection and recovery –Stay – Once the CIT(A) concludes hearing the appeal, the stay application becomes infructuous. CBDT should investigate arm twisting measures, de hors application of the law, adopted by the Revenue for recovery of tax and take corrective measures to ensure AOs are not over zealous in recovering maximum revenue before 31st March – CBDT was directed to take appropriate measure [Ss. 220(6), 226, 246A]
Allowing the petition the Court held that once the CIT(A) concludes hearing the appeal, the stay application becomes infructuous. The exercise by CIT(A) of taking up the stay application, after the appeal was heard, was only done so as to collect some revenue before 31st March, 2018. This is certainly not expected of an Appellate Authority who adjudicates disputes between the Revenue and the assessee on a regular basis. The CIT(A) must not only be fair but appear to be so, in a country governed by rule of law. CBDT should investigate arm twisting measures, de hors application of the law, adopted by the Revenue for recovery of tax and take corrective measures to ensure AOs are not over zealous in recovering maximum revenue before 31st March (WP. No. 939 of 2018,
dt. 27-3-2018)( AY. 2015-16).
The Shri Saibaba Sansthan Trust (Shirdi) v. UOI (Bom.) (HC), www.itatonline.org
S.226 : Collection and recovery – Modes of recovery – Revenue cannot issue notice for recovery directly to assessee’s bank without giving an opportunity to be heard – Appropriate direction for re-crediting the amount to assessee’s bank account issued to the Revenue
HELD by the High Court that the principle laid down in the case of Shri Lakshmi Brick Industries v. TRO  351 ITC 345 and the judgment of Hon’ble Supreme Court of India in case of Mohan Wahi v. CIT  248 ITR 799(SC) would apply with full force in the present case and it will be fully justified in issuing appropriate direction to recredit the amount to the assessee’s bank account. (W. P. No 33765 of 2017 / W.M.P Nos. 37408 and 37410 of 2017 dt. 22-12-2017) (AY. 2009-2010)
Rapid Care Transcription (P) Ltd. v. ITO (2018) 253 Taxman 392 (Mad.)(HC)
S.234A : Interest – Default in furnishing return of income – Bona fide family dispute – Entitled to waiver of interest. [S. 119, 133A, 148, 234B, 234C]
The assessee approached the Chief Commissioner under S.119(2)(a) for waiver of interest. The assessee in his application for waiver stated that he was under the bona fide belief that he had no taxable income and therefore not required to file a return. The Chief Commissioner had rejected the petition for waiver on the grounds that the assessee failed to voluntarily file its return but the return was filed consequent upon a survey conducted under S. 133A and issuance of notice under section 148 and tax on the assessed income was not paid which was a pre-condition for waiver of interest. On writ the Court held that the property continued to be in the name of the HUF i.e., it remained undivided and there were serious civil disputes between the family members. Thus, when the property continues to remain undivided, the assessee cannot anticipate the accrual/receipt of such income hence the assessee was right in the befief that he had no taxable income. The High Court also held that the return was filed well before the issuance of notice under section 148 and merely because there was a survey counducted in premises canot be stated that the ROI was not voluntatily filed by the assessee. Hence the assessee would be entitled to waiver of interest levied under section 234A. The High Court also observed that the circular (Circular No. 400/234/95 dated 30-1-1997) issued by the Board empowering the Chief Commissioner to consider the waiver petition for waiver of interest under S 234A as well as S. 234B would show that even in cases covered by section 234B and even though these provisions are compensatory in nature, special orders for grant of relaxation could be passed. It was further held that the dispute with regard to the division of property was a bona fide dispute which directly relates to the assessbility of the petitioner to tax. Therefore, if the petitioner is entitled for waiver of interest under S. 234A for the reasons set out above, the question of payment of advance tax nor a portion thereof will not arise and therefore, the petitioner is entitled for waiver of interest under S. 234B and 234C as well (AY. 1997-98, 1998-99).
R. Mani v. CCIT (2018) 253 Taxman 3 (Mad.) (HC)
S.245D : Settlement Commission – Settlement Commission does not have power to rectify, review or re-examine order passed in the rectification application [S. 234B, 245C]
Dismissing the petition of revenue the Court held that Settlement Commission does not have power to rectify, review or re-examine order passed in the rectification application.
PCIT v. Frontline Business Solutions (P.) Ltd. (2018) 252 Taxman 217 (Delhi)(HC)
S.254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – Reliance on a decision not subject-matter of consideration during the hearing of appeal (and having influence on final view) constitutes mistake apparent from record
HELD by the High Court that:
(i) It cannot be stated with certainty that the decision of Delhi High Court had not evenly remotely influenced the decision taken given the manner in which the order has been structured and the final view given after considering such decision. Hence the Tribunal while dealing with the rectification application, must deal with the assessee’s grievance that the Delhi High Court’s decision does not apply to the present case / facts.
This restoration is only to reconsider the assessee’s grievance in respect of reference / reliance upon the Delhi High Court decision in the original order and pass appropriate order on the rectification application (W.P. Nos 2065, 2075, 2068 of 2017 dt. 19-1-2018) (AY. 2009-10).
Rama Industries Ltd .v. DCIT (2018) 163 DTR 156/92 taxmann.com 289 (Bom) (HC).
Rama Petrochemicals Ltd. v. DCIT (2018) 163 DTR 156/92 taxmann.com 289 (Bom) (HC)
Rama Phosphates Ltd. v. DCIT (2018) 163 DTR 156/92 taxmann.com 289 (Bom) (HC)
S.254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – Order in the case of sister concern is binding on the Tribunal unless set-aside or stayed. A rectification application on the ground that the orders in the sister concern’s case are not correct is not permissible as it amounts to a review [S. 254(1)]
Allowing the petition the Court held that Order in the case of sister concern is binding on the Tribunal unless set-aside or stayed. A rectification application on the ground that the orders in the sister concern’s case are not correct is not permissible as it amounts to a review (WP No. 2738 of 2017, dt. 9-3-2018) (AY. 2004-05).
Procter & Gamble Home Products Pvt. Ltd. v. ITAT (Bom.)(HC), www.itatonline.org
S.260A : Appeal – High Court – Departmental Counsel – CBDT should reconsider the practice of appointing retired revenue officers as panel counsel. CBDT should lay down a standard procedure in respect of manner in which the Departmental Officer/Assessing Officer assist the Counsel for the Revenue while promoting/ protecting Revenue’s cause so that the Revenue’s Counsel are not left to fend for themselves. Copy of the judgment was forwarded to Chairman CBDT [S.119]
Considering the assistance given to the Court by the departmental counsel before the Bombay High Court, the Hon’ble Court observed that; the CBDT should reconsider the practice of appointing retired revenue officers as panel counsel. While the retired officials have domain expertise and do render assistance, they lack the skill and conduct required to appear as an advocate. They also lack the objectivity expected from officers of the court. The CBDT could consider holding of a training programme, where leading advocates could address the domain expert on the ethics, obligation and standard expected of advocates before they start representing the State. The CBDT should lay down a standard procedure in respect of manner in which the Departmental Officer/Assessing Officer assist the Counsel for the Revenue while promoting/protecting Revenue’s cause so that the Revenue’s Counsel are not left to fend for themselves. Court directed the learned ASG and the Registry to forward a copy of this order to the Chairman, CBDT. We would expect the learned ASG to interact and advice the CBDT in respect of the issues referred to herein above to enable proper representation by the advocates on behalf of the Revenue (ITA No. 778 of 2015, dt. 18-4-2018) (AY. 2001-02).
PCIT v. Grasim Industries Ltd. (Bom.)(HC), www.itatonline.org
S.260A : Appeal – High Court –Strictures passed against Dept’s Advocate for “most unreasonable attitude” of seeking to reargue settled concluded issues and not following the judicial discipline and law of precedents – Infrastructure facility – Container Freight Station (CFS) is eligible deduction as an infrastructure facility [S.80IA]
Dismissing the appeal of the revenue the Court has passed strictures passed against Dept’s Advocate for “most unreasonable attitude” of seeking to reargue settled concluded issues. This results in unnecessary wastage of the scarce judicial time available in the context of the large number of the appeals awaiting consideration. Dept’s Advocate is expected to act with responsibility as an Officer of the Court and not merely argue for the sake of arguing when an issue is clearly covered by the decision of Co- ordinate Bench of the Court and take up scarce judicial time. Advocates must bear in mind that this is a Court of law and not an University/College debating Society, where debates are held for academic stimulation. We deal with real life disputes and decide them in accordance with the Rule of Law, of which an important limb is uniformity of application of law. This on the basis of judicial discipline and law of precedents (ITXA-613-2015 ITXA-618-2015 (SR.3), dt. 11-4-2018)(AY. 2008-09, 2009-10).
PCIT v. JWC Logistics Park Pvt. Ltd. (Bom.)(HC), www.itatonline.org
S.260A : Appeal – High Court – Formulation of additional substantial question of law – Court has the power to frame an additional substantial question of law even at the time of hearing of appeal [S.32, 80HH, 260A(4)]
Court held that S.260A(4) confers power on the Court to hear, for the reasons to be recorded, the appeal on any other question of law not formulated by it, if the Court is satisfied that such a question arises. Additional question was framed whether the assessee can disclaim depreciation when it claimed deduction u/s 80HH (AY. 1989-90).
CIT v. Auto Mobile Corporation of Goa Ltd. (2018) 164 DTR 168 (Bom.) (HC)
S.263 : Commissioner – Revision of orders prejudicial to revenue – Order passed after expiry of two years from the end of the financial year was held to be bad in law. [S.260A]
The assessee has challenged the validity of the notice issued under S. 263 of the Act and the order passed thereon by the CIT. The High Court held that the CIT who passes order under S. 263 of the Act ought to satisfy himself that an adequate opportunity has been given to the Assessee to controvert the facts stated in the notice issued under S. 263 of the Act and to explain the circumstances surrounding such facts. However on facts no useful purpose would be served in providing an opportunity of being heard at this stage to the assessee as S. 263(2) provides an outer limit in the statute hence petition in favour of Assessee. (ITA. No 853 of 2015 dt. 14-9-2017) (AY. 2009-09).
Tulsi Tracom Private Ltd v. CIT (2017) 100 CCH 0013/(2018) 161 DTR 148 (Delhi)(HC)
S.271(1)(c) : Penalty – Concealment – Donation – Withdrawal of claim on alleged bogus donation and filing the revised return disclosing the alleged bogus donation –Deletion of penalty was held to be valid [Ss. 35(1)143(3), 148].
Dismissing the appeal of the revenue, the Court held that when the donation was made the assessee believed that the Indian Medical Scientific Research Foundation was genuine, however after conclusion of enquiry by CBI it was found that the institution was bogus. The assessee withdrew the claim in the revised return filed in pursuance of notice u/s. 148, as there was complete disclosure on the part of the assessee, deletion of penalty was held to be justified (AY. 2004-05).
CIT v. Man Industries Ltd. (2018) 164 DTR 165 (Bom.) (HC)
S.271AAA : Penalty – Search initiated on or after 1st June, 2007– Payment of tax with interest before assessment was made-Deletion of penalty was held to be justified [S. 132, 132(4)]
Dismissing the appeal of the revenue the Court held that Payment of tax with interest before assessment was made. Deletion of penalty was held to be justified. Both Commissioner (Appeals) as well as the Tribunal had recorded concurrent findings of fact that the partner of the firm, AGK, during the course of recording of his statement at the time of the search, had stated that the income was earned by accepting on-money in its building project. Therefore, the manner in which the income had been derived has been clearly specified in his statement. It was not the case of the Department that during the course of recording of the statement of AGK any specific questions had been asked to substantiate the manner in which the income was derived (AY. 2011-12).
CIT v. Swapna Enterprise (2018) 401 ITR 488 (Guj.) (HC)
S. 275 : Penalty – Bar of limitation – Concealment – Time to be reckoned from date of service of order of Commissioner (Appeals) on assessee – Penalty proceedings was barred by limitation [S. 271(1) (c)]
Allowing the appeal of the assessee the Court held that it was incumbent upon the Department to have completed the penalty proceedings and passed an order within the prescribed period of limitation of six months. The Department’s appeal before the Tribunal was never heard, no effective proceedings were held nor was any order passed. The assessee was not notified about the filing of the appeal, its pendency or its withdrawal. According to section 275(1A), the expiry of six months prescribed was to be reckoned “from the date of completion of the proceedings or from the end of the month in which the order of the Commissioner (Appeals) or the Tribunal was received”. It was an adjudicatory “order” which culminated in “the proceedings”, an order that determined, inter alia, the rights of the parties finally, that was to be deemed a terminus a quo for the completion of penalty proceedings. The dependence of the period of the limitation upon whether an order became final at the instance of one party would leave the legal position inchoate and unsatisfactory. An interpretation that permitted certainty had to be adopted. The order of the Commissioner (Appeals) provided a fixed date from which to reckon the end of the period of limitation. The absence of an appeal by the assessee against the order of the Commissioner (Appeals) meant that at least with respect to the amount that it had accepted in the adjudicatory order as an addition, the penalty proceedings survived. There was no occasion for further penalty proceedings given that the issue might have been rendered debatable, even in the eventuality of an order favouring the Department. The order of the Tribunal holding that the penalty order was within the period of limitation was unsustainable. (AY. 1989-90).
Salora International Ltd. v. CIT (2018) 402 ITR 211 (Delhi) (HC)
S.276C : Offences and prosecutions – Wilful attempt to evade tax – Order of penalty was set aside on ground there was no concealment of income — Prosecution was liable to be quashed [S. 271(1)(c)].
Allowing the appeal the Court held that the basis for initiating proceedings under the Income-tax laws by imposing penalty and on the criminal side by lodging a criminal complaint is the same. The levy of penalties and prosecution under Section 276C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under Section 276C is automatic.
Malti Mishra (Smt.) v. State of Uttar Pradesh. (2018) 401 ITR 327 (All.) (HC)
S.279 : Offences and prosecutions – Sanction – Chief Commissioner – Late deposit of tax deducted at source – If sanctioning was held to be not as per requirement of law summons issued by the Court can be challenged. [Ss.276A, 276B 278AA, 278AB,278B, Code of Criminal Procedure Code, Ss. 397, 401, 482]
If the assessee is able to make out that cognisance was not justified and as per law they can challenge and question the summoning order by way of petition u/s. 397 read with Section 401 of the Code of Criminal Procedure, 1973 or if permissible, by way of a petition under Section 482 of the Code. Referring various case laws the Court observed that following principles can be culled out:
(a) It is incumbent on the prosecution to prove that the valid sanction has been granted by the sanctioning authority after being satisfied that a case for sanction has been made out.
(b) The sanction order may expressly show that the sanctioning authority has perused the material placed before it and, after consideration of the circumstances, has granted sanction for prosecution.
(c) The prosecution may prove by adducing the evidence that the material was placed before the sanctioning authority and its satisfaction was arrived at upon perusal of the material placed before it.
(d) Grant of sanction is only an administrative function and the sanctioning authority is required to prima facie reach the satisfaction that relevant facts would constitute the offence.
(e) The adequacy of material placed before the sanctioning authority cannot be gone into by the court as it does not sit in appeal over the sanction order.
(f) If the sanctioning authority has perused all the materials placed before it and some of them have not been proved that would not vitiate the order of sanction.
(g) The order of sanction is a prerequisite as it is intended to provide a safeguard to a public servant against frivolous and vexatious litigants, but simultaneously an order of sanction should not be construed in a pedantic manner and there should not be a hyper-technical approach to test its validity.” (WP No. 3964/2017, dt. 12-3-2018)
Indo Arya Central Transport Limited v. CIT (TDS) (Delhi)(HC), www.itatonline.org
S.281 – Certain transfers to be void – Tax Recovery officer (TRO) has no jurisdiction to declare transaction of transfer of property as null and void in proceedings under rule 16 of Second Schedule to Act [S. 220, R.48]
Allowing the petition the Court held that ; Tax Recovery officer (TRO) has no jurisdiction to declare transaction of transfer of property as null and void in proceedings under Rule 16 of Second Schedule to Act. Followed, TRO v. Gangadhar Vishwanath Ranade (1998) 234 ITR 188 (SC) and Co-ordinate Bench in case of Karsanbhai Gandabhai Patel v. TRO (2014) 43 taxmann.com 415 (Guj) (HC) and held that TRO had no power to declare transfer as void and the status of the department being a creditor, will have to file a suit for a declaration that the transaction of transfer is void under S. 281 of the Act.
Nitaben Harishbhai Shah v. TRO (2018) 253 Taxman 222 (Guj) (HC)
Wealth-tax Act, 1957 – Finance Act 1983
S.40(3) : Levy of wealth tax on land and building which is not used for the purpose of business was held to be valid – Parliament has legislative competence to tax land and buildings which are in List-II of the 7th Schedule and whether the classification of “companies in which the public are not substantially interested” is neither arbitrary nor violative of Article 14 of the Constitution of India [Art. 14]
Dismissing the petition the Court held that S. 40(3) of the Act bringing to tax land and building which is not used for business purposes by companies in which public are not substantially interested to tax under the Wealth-tax Act and leaving out those land and buildings which are used for business purposes by companies in which public are not substantially interested from the charge of wealth-tax under the Act is a reasonable classification. Therefore, the legislation bringing to tax land and buildings owned by the companies in which public are not substantially interested without any reference to the manner in which such companies came into ownership of the land and buildings is a decision taken by the legislature and cannot be faulted on the touchstone of Article 14 of the Constitution of India. The speech of the Finance Minister while introducing the bill points out the mischief which was existing namely persons transferring land and buildings owned by them to closely held companies i.e., companies in which the public are not substantially interested so as to evade payment of wealth-tax. Therefore, the legislation to cure the mischief was to bring to tax all companies in which public are not substantially interested to the extent it held land and buildings which are not used for business purposes, without determining the source and manner of acquisition.
In fact, the Finance Minister’s speech itself indicates that it is proposed to levy wealth-tax in case of closely held companies inter alia in respect of land and buildings owned by such companies and not used for the business purposes. The object of introducing the bill was in terms of the Finance Minister’s speech not restricted only to bring to tax those companies in which public are not substantially interested to which the land and building has been transferred by its members. The Parliament has decided to bring to tax the land and buildings not used for the purposes of business and owned by the companies in which the public are not substantially interested.
The Parliament has thus made a reasonable classification between the companies in which public are substantially interested from the companies in which public are not substantially interested. This classification cannot be found fault with because the petitioners want further classification to have been done by the Parliament.
The remedy of the petitioners, if any, in matters such as this, is to have the Parliament to amend the law so as to meet what according to the petitioners would be the most just and appropriate classification, by adding further classification and restricting its applicability only where the assets have not been acquired by the company in which the public are not substantially interested out of its own profits.
The legislature has in its wisdom decided that the executive should not be burdened with finding out the manner in which the land and buildings has been acquired by the company, to bring it to tax. The mere fact that there is land and building owned by the company and it is not used for the purposes of business is sufficient to hold that these assets to be taken into account under Section 40(3) of the Act for the purposes of wealth-tax under the Wealth-tax Act. Therefore, the challenge to Section 40(3) of the Act is not sustainable. (WP No. 2983 of 1987, dt. 2-4-2018).
Indian Express Newspapers (Bom.)Private Ltd. v. IAC (Bom.)(HC), www.itatonline.org