DIRECT TAXES – Tribunals

  1. S. 2(42A) : Short-term capital asset – Shares of unlisted company – Holding shares for more than 12 months and transferring them prior to 31-03-2014 to be treated as long term capital gains – Holding Shares for more than 12 months and transferring them prior to 31-3-2014 – Entitled to benefit of shorter period of holding – Gains to be Treated as long-term. [S. 2(29A), 2(29B), 45]

    The assessee bifurcated income from capital gains on sale of shares into short-term capital gains and the long-term capital gains. The assessee purchased the shares in the financial year 2012-13 and sold them in the assessment year 2014-15, she computed the indexed cost of acquisition of those shares. These shares were sold on March 21, 2014 and thus she claimed long-term capital gains. The AO held that the shares were held for less than 36 months and they were short-term capital assets. According to the provisions of S. 2(42A) of the Act the AO held that shares of an unlisted company, if held for less than 36 months, were not a long-term capital asset but a short-term capital asset. The CIT(A) gave partial relief. On appeal the Tribunal held that the benefit of the shorter period of holding of 12 months to qualify as long-term capital asset in respect of unlisted shares had been removed prospectively from the AY. 2015-16 and not for earlier years. The benefit of the shorter period for holding of unlisted shares would be available when such shares were transferred during the period beginning on April 1, 2014 and ending on July 10, 2014. Post-July 11, 2014 the benefit of the shorter period of unlisted shares could not be applicable. The shares had been transferred by the assessee prior to March 31, 2014. Therefore, the newly amended section would not be applicable and the assessee would get the benefit of the shorter period, i.e., period of less than 36 months as given in S. 2(42A) read with the proviso thereto in terms of the provision as it existed for the assessment year 2014-15. Thus, the authority was not justified in reclassifying the long-term capital gains as short-term capital gains. Accordingly, the gains on transfer of shares of Shares would be taxable as long-term capital gains as the assessee had held those shares for more than 12 months. (AY. 2014-15)

    Neelu Analjit Singh (Mrs.) v. Add. CIT (2020) 77 ITR 220 (Delhi)(Trib)

  2. S. 10(13A): House rent allowance – Qualifying amount – Ten Per Cent. of Salary – Performance bonus – Does not form part of salary for purpose of S. 10(13A) Entitled to allowance at 10% of salary excluding performance bonus [R. 2A]

    Tribunal held that the performance bonus does not form part of salary as defined in Rule 2A for the purposes of S. 10(13A). The total rent paid by the assessee during the year 2011-12 was ₹ 8.20 lakhs. The basic salary for the purpose of computation of house rent disallowance was ₹ 3 lakhs (10 per cent of ₹ 30 lakhs being the basic salary). Therefore, the excess of rent paid over 10 per cent of salary was ₹ 5.20 lakhs  (₹ 8.20 lakhs – ₹ 3 lakhs). Therefore, the assessee was entitled to house rent allowance at ₹ 5.20 lakhs under S. 10(13A) of the Act. The AO was directed to allow the exemption of house rent allowance at ₹ 5.20 lakhs. (AY. 2011-12)

    Sudip Rungta v. Dy. CIT (2020) 77 ITR 63 (SN)(Kol.)(Trib)

  3. S. 10A: Free trade zone – Special economic zones – Conversion of Export processing zone unit into special economic zone unit – Exemption cannot be denied

    Tribunal held that period of ten consecutive AYs shall be reckoned from AY relevant to previous year in which unit begins to manufacture or produce or process such articles or things or service in such free trade zone or export processing zone. Entitled to exemption for period of ten consecutive AY and S. 10A(1) is continuously applicable to unit even after being converted into special economic zone unit keeping in view the second Proviso to S. 10A (1). (AY. 2011-12)

    Classic Linens International P. Ltd. v. Dy. CIT (2020) 77 ITR 1 (Chennai)(Trib.)

  4. S. 11: Property held for charitable purposes – Trust – Beneficiaries a group of individuals – Does not mean association of persons – Assessee to be treated an individual. [S. 2(31)(v), 12A]

    Tribunal held that the trust was treated as an individual. Therefore, the AO was to tax the assessee treating it as an individual instead of an association of persons. The fact that the beneficiaries were a group of individuals did not mean that the liability of the assessee was of the association of persons. The term “individual” does not mean a single living human being. It can include a body of individuals constituting a unit for the purposes of the Act. Even though the assessment of income was in the hands of the Trust, it had to be made in the same manner and to the same extent as it would have been made in the hands of the beneficiaries. (AY. 2012-13)

    Saraswat Hitwardhak v. ITO (2020) 77 ITR 89 (SN)(Mum.)(Trib.)

  5. S. 22 : Income from house property – Deemed owner – Income from house property – Income from business – Sub-letting of property – Leasing of property for a period exceeding 12 years – Lease rental is assessable as income from house property and not as business income.
     [S. 27(iiib), 28 (i), 56, 269UA(f)]

    Tribunal held that, leasing of property for a period exceeding 12 years. Lease rental is assessable as income from house property and not as business income. (AY. 1990-91 to 1992-93, 1994-95, 1998-99, 2000-01 to 2003-04)

    Nahalchand Laloochand P. Ltd. v. Dy. CIT (2020) 77 ITR 664 (Mum.)(Trib.)

  6. S. 22: Income from house property – Business income – Unsold flats –Stock in trade – No rental income to be computed when flats held as stock-in-trade [S. 23(5), 28(i)]

    The assessee is a builder and developer. During the course of assessment proceedings it was found that the assessee had on hand unsold flats and shops. The AO computed the notional rental on such stock-in-trade under the head “Income from house property” at ₹ 5,54,400. The CIT (A) upheld the contention of assessee in taxing the income as income from business. On appeal the Tribunal held that no rental income could be computed when the flats were held as stock-in-trade. The Finance Act, 2017 with effect from April 1, 2018 has inserted sub-section (5) of section 23 which has the effect of providing that from the assessment year 2018-19, stock-in-trade of buildings, etc., shall be liable to be considered for computation of annual value under the head “Income from house property” after two years from the end of the financial year in which the certificate of completion of construction of the property is obtained. As the assessment year was 2015-16, the amended S. 23 would not apply. (AY. 2015-16)

    Rafiahamad Rasul Patel v. ITO (2020) 77 ITR 16 (SN)(Pune) (Trib)

  7. S. 23: Income from house property – Business income – Annual letting value – Non-resident Director – Flat used as residence as well as carrying on business – Notional value from property cannot be assessed as income from house property. [S. 22, 23(1), 23(4), 28(i)]

    Assessee owning flat and giving to Non-resident director for residence as well as carrying on business therein. Tribunal held that flat a business asset used partly for business and partly for residence of both shareholder directors, notional income from property cannot be assessed as income from house property. (AY. 2013-14)

    Record Investments and Leasing Pvt. Ltd. v. ITO (2020) 77 ITR 76 (SMC)(SN)(Mum.)(Trib.)

  8. S. 32 : Depreciation – Survey – Statement on oath – Merely on the basis of statement made in the course of survey – Depreciation cannot be disallowed. [S. 133A]

    Tribunal held that merely on the basis of statement made in the course of survey depreciation cannot be disallowed when the assessee has produced the reconciliation chart of plant and machinery with Dalal Mott Macdonald report were also submitted to the effect that machines were very much there and inspection was duly carried out by the surveyor. And Valuation Report certificate dated 26-5-2003 wherein before granting loan IDBI Bank carried out inspection and Valuation Report was duly prepared wherein details of all the machines were given. (AY. 2002-03, 2005-06)

    Shree Rama Multi-Tech Ltd. v. Dy. CIT (2020) 185 DTR 163 / 203 TTJ 129 (Ahd.)(Trib.)

  9. S. 40(a)(ia): Amounts not deductible – Deduction at source – Labour charges – Failure to deduct tax at source – As per amendment brought to Finance Act, 2014 in S. 40(a)(ia) w.e.f. 1-4-2015, disallowance is restricted to 30% of amount of expenditure claimed – Amendment is applicable to retrospective effect. [S. 194C, 194H]

    The assessee had claimed labour charges, Architect Fees and towards expenses under head commission, which were in nature of payments made towards contract payment u/s. 194C, professional fees payment u/s. 194H and commission payment u/s. 194H. Assessee had also failed to deposit TDS amount so deducted from payments made towards expenses on account of labour charges, professional fees and commission to Central Govt. A/c within specified time limit. AO made disallowance u/s 40(a)(ia) of the Act. CIT(A) confirmed the disallowance. On appeal the Tribunal held that as per amendment brought to Finance Act, 2014 in s. 40(a)(ia) w.e.f. 1-4-2015 if 100% disallowance made u/s 40(a)(ia), that would be restricted to 30% only giving retrospective effect. Intent of legislature to reduce hardship, it was proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in s. 40(a)(ia), disallowance should be restricted to 30% of amount of expenditure claimed. (AY. 2014 -15)

    Om Sri Nilamadhab Builders Pvt. Ltd. v. ITO (2020) 185 DTR 201 / 203 TTJ 229 (CTK.)(Trib.)

  10. S. 40(b)(iii): Amounts not deductible – Working partner – Remuneration – Interest – Rejection of books of account and assessment adopting 8 Per cent. of gross turnover as net profit – Separate deduction towards interest on partner’s capital account and remuneration to partner is to be allowed, when net profit is estimated from gross receipts. [S. 133A]

    Tribunal held, that the partnership deed contained a provision for interest on capital at 12 per cent. per annum and clause 17 provided for remuneration to whole time working partners and the method of computation of remuneration. By a supplementary deed the manner of paying remuneration to the whole time working partners had been revised. In the assessment years 2009-10 to 2011-12, the assessee had claimed interest on capital and remuneration to the partners, which was verifiable from the computation of income. The AO was directed to allow remuneration to the partners and interest on capital as per the provisions of law. Interest on the partners’ capital account and remuneration to partners was allowable as deduction even after estimation of the net profit from the gross receipts. (AY. 2012-13)

    Mayasheel Construction v. Dy. CIT (2020) 77 ITR 8 (SN)(Delhi)(Trib.)

  11. S. 54: Capital gains – Profit on sale of property used for residence – Purchase of residential house – Land purchased admeasuring 4973.125 square Feet – Building constructed of 150 square feet – only 25 per cent. of total plot area to be considered as land appurtenant thereto [S. 45]

    The assessee held a plot of land of 4973.125 square feet. It had building of 220 square feet on the plot of land which was even less than 5 per cent. of the total plot of land. Thus, it could not be said that the rest of the plot of land was appurtenant to the building of 220 square feet existing on the plot of land for enjoyment of the building. The assessee had claimed that there was open space which was used for car park, septic tank, garden, etc. These open spaces may be an integral part but certainly these were not required to enjoy the building of 220 square feet on the plot of land of 4973.125 square feet. Both the authorities had concurred that 25 per cent. of the total plot area to be considered land appurtenant thereto. It could not be said that the estimation done by the authorities was perverse or without any reasonable basis. (AY. 2013-14)

    Maduranthagam Selvaraj Ravi v. Dy. CIT (2020) 77 ITR 6 (SN)(Chennai)(Trib.)

  12. S. 54: Capital gains – Profit on sale of property used for residence – No requirement that construction of house should have been completed within specified time – Matter remanded for verification. [S. 45]

    1. Tribunal held that the requirement of S. 54 of the Act is for the assessee to have either purchased a residential house, being a new asset, within the stipulated period or constructed a residential house within a period of three years from the date of transfer. The section does not prescribe the completion of construction of residential house and the thrust was on the investment of net consideration received on sale of original asset and start of construction of a new residential house. It was incorrect to insist that the assesse should establish that the residential house was complete and then ask for benefit under s. 54. Since no documentary evidence had been furnished and only a claim had been made, the issue was restored to the file of the AO. (AY. 2013-14)

    2. Rakesh Kumar Kalra v. ITO (2020) 77 ITR 36 (SN)(Delhi)(Trib.)

  13. S. 64 : Clubbing of income – Set-off of business loss of the wife in the assessment of husband – Entire amount of loss resulting from the business started by wife with the gifts received from her husband is liable to be clubbed in the hands of the assessee. [S. 64(1)(iv)]

    The assessee filed return declaring total income of ₹ 4,59,830/- comprising, inter alia, Business income. During the course of assessment proceedings, the AO observed from the computation of total income that the assessee clubbed loss from the business of his spouse amounting to ₹ 31,56,429/- in view of the provisions of S. 64 of the Act. On being called upon to justify such a claim, the assessee submitted that during the year under consideration he gifted a sum of ₹ 94.50 lakh to Mrs. Priti Bhaskarwar, his wife, who started business of Futures and Options (F&O) on 18-9-2013. The assessee claimed that she incurred loss of ₹ 31,56,429/- in such business, which was clubbed in his hands. The AO accepted the primary claim of the assessee of his wife having incurred loss of ₹ 31.56 lakh in the business of F&O, which was set up on 18-9-2013 and further that loss from such business was eligible for set off against the income of the assessee in terms of S. 64(1)(iv) read with Explanation 3 thereto. He, however, did not accept the assessee’s contention that the entire loss of ₹ 31.56 lakh be set off against the assessee’s income. CIT(A) also affirmed the order of the AO. On appeal the Tribunal held that, entire amount of loss resulting from the business started by wife with the gifts received from her husband is liable to be clubbed in the hands of the assessee.
     (AY. 2014-15)

    Uday Gopal Bhaskarwar v. ACIT (2020) 186 DTR 65 / 203 TTJ 776 (SMC)(Pune)(Trib.)

  14. S. 68: Cash credits – Penny stock – Bogus capital gains – Not sufficiently discharged the onus on proving the source of deposits – Addition is restricted to 30% with the a rider that same shall not be treated as a precedent to other assessment years [S. 10(38), 45]

    The assessee has produced documentary evidence in respect of sale of shares to demonstrate that the capital gains on sale of shares is exempt from tax. Tribunal held that as the detailed explanation of the assessee does not sufficiently discharge the onus on proving the source of impugned deposits, the impugned addition should be restricted to 30% only with a rider that same shall not be treated as a precedent in any other assessment year. (ITA No. 1790-1791/Kol/2019 Dt. 14-2-2020) (AY 2014-15 & 2015-16)

    Neha Chowdhary v. ITO (SMC)(Kol.)(Trib.) www.itatonline.org

  15. S. 69: Undisclosed investments – Bogus capital gains – Penny stocks – Explanation is not sufficient to discharge the liability – Addition is restricted to 30% with a rider that same shall not be treated as a precedent in any other assessment year. [S. 10(38), 45, 68, 143(3)]

    The assessee is a salaried person who was sold her stock holding in shares in the relevant two previous years. AO treated as unexplained income since assessee could not prove source thereof during the course of scrutiny as well as in the lower appellate proceedings. Tribunal held that the fact remains that her detailed explanation tendered in the course of assessment does not sufficiently discharge her onus on proving the source of impugned deposits. Accordingly considering peculiar facts and circumstances that the addition(s) of ₹ 17,88,666/- and ₹ 16,53,772/- are restricted to that @ 30% only with a rider that same shall not be treated as a precedent in any other assessment year. The assessee gets part relief accordingly. (ITA No. 1790-1791/Kol/2019, dt. 14-2-2020) (AY. 2014-15, 2015-16)

    Neha Chowdhary v. ITO (SMC)(Kol.)(Trib.) www.itatonline.org

  16. S. 69: Unexplained investments – Books of account not audited – Net profit to be estimated at 8% – Cash gift from relatives – Mother in law – Relative – Agricultural income – No reason to doubt genuineness and creditworthiness of source – Addition is not justified. [S. 56, Explanation, (e), 68]

    Tribunal held that the assessee had not shown the business receipts and income under the head business income but this could not preclude the assessee from claiming incidental expenses incurred for carrying out business. Though assessee had declared 6.28 per cent. net profit rate on the transport business on the gross receipts of ₹ 19,88,592, an estimate of net profit at 8 per cent. of the gross receipts of ₹ 19,88,592, i.e., ₹ 1,59,087 would be justified. As regards the gifts of ₹ 10 lakhs and ₹ 2.50 lakhs were received in cash. During the course of appellate proceeding the assessee placed sufficient documentary evidence to prove the identity, genuineness and creditworthiness of the donors. The gift of ₹ 10 lakhs received from the assessee’s mother-in-law who was said to be the owner of around 50 acres agricultural land receiving regular income from agricultural proceeds for many years. The gift deed was duly notarised and she had declared her accumulated capital, stridhan and income from gift received from her husband who was earning regular agricultural income, was the source of the gift given to her son-in-law. The fact that the mother-in-law had regular source of agricultural income and the authenticity of gift deed had not been disputed. She was also “relative” of the assessee as provided in clause (e) of Explanation to S. 56. There was no reason to doubt the genuineness and creditworthiness of the gift at ₹ 10 lakhs. (AY. 2010-11)

    Vinod Kumar Jain v. ITO (2020) 77 ITR 83 (SN)(Indore)(Trib.)

  17. S. 70 : Set off of loss – Long term capital loss against long term capital gains – Long term capital loss arising out of sale of shares cannot be set off against long-term capital gain from sale of shares subjected to STT and claimed exempt u/s. 10(38) – Directed the AO to allow carry forward of long term capital loss as claimed by the assessee. [S. 2(14), 10(38), 45, 74]

    The assessee had long term capital gain of ₹ 519,21,44,332 on which it has paid Securities Transaction Tax (STT) hence, claimed as exempt u/s. 10(38) of the Act. In the course of assessment proceedings, the AO noticed that the assessee had claimed carry forward of long term capital loss from sale of shares, though STT paid, at ₹ 31,00,52,918. However, the assessee has not set off long term capital loss against long term capital gain. Therefore, he called upon the assessee to explain why such long term capital loss should not be set off against long term capital gain and carry forward of loss to such extent should not be disallowed. In response, it was submitted by the assessee that as per S. 10(38) of the Act, only income arising from long term capital gain on sale of shares subjected to STT is exempt u/s. 10(38) of the Act. Thus, it does not include loss arising out of sale of shares. The AO however, did not find merit in the submissions of the assessee. He observed, the term income as used in S. 10(38) refers to the entire receipts arising from transfer of long term capital asset and also includes loss. Accordingly, he set off the long term capital loss against the exempt long term capital gain, which resulted in part disallowance of carry forward of long term capital loss. The aforesaid decision of the AO was also upheld by the CIT(A). The Tribunal held that the long term capital loss arising out of sale of shares cannot be set off against long term capital gain from shares subjected to STT and claimed exempt u/s. 10(38) of the Act. Accordingly directed the AO to allow carry forward of long term capital loss as claimed by the assessee. (AY. 2007-08)

    Nomura India Investment Fund Mother Fund v. ADIT (IT) (2020) 186 DTR 212 / 203 TTJ 212 (Mum.)(Trib.)

  18. S. 143(3): Assessment – Survey – Difference in stock – Statement recorded during survey not under oath – Retraction of statement with explanation – Addition is held to be not justified. [S. 133A]

    Allowing the appeal of the assessee the Tribunal held that, merely on the basis of statement, addition cannot be when the statement was retracted and detailed explanation with supporting evidence was fled in the course of assessment proceedings. The Tribunal held that the AO had simply ignored the evidence and had made the addition merely on the basis of the letter submitted by the assessee which stood retracted later. Moreover, the surrender was not under oath. The Assessing Officer had not brought any material to rebut the explanation of the assessee. S. 133A does not empower any Income-tax authority to examine any person on oath and therefore any admission made in a statement recorded during survey cannot by itself be made the basis of addition. Thus the addition was not tenable in the eyes of law and was deleted. (AY. 2012-13)

    MNP Turnmatics v. ITO (2020) 77 ITR 31 (SN)(Delhi)(Trib.)

  19. S. 148: Reassessment – Notice – Reply stating that original return filed should be treated as return filed in repose to notice u/s. 148 – Postal receipt is filed – Neither notice u/s. 143(2) is issued nor assessment completed u/s. 144 of the Act nor interest charged u/s. 234A – Reassessment is held to be not valid [S. 139, 143(2), 144, 147, 234A]

    Tribunal held that the notice under S. 148 was issued on the same date, the objection of the assessee for such reopening was disposed of by the AO passing a speaking order on the same date, the reassessment orders for both the years were passed on the same date and the CIT (A) also had passed the appellate orders for both the years separately on the same date. Therefore, it could not be said that the assessee had filed the reply for treating the earlier return as the return in response to the notice under S. 148 only for the AY. 2010-11 and not for the AY. 2011-12, especially when the postal receipts for both the speed posts were also on the same date. Since, the assessee filed the letter stating that the return filed originally may be treated as return filed in response to the notice under S. 148 and since the notice under S. 143(2) was not issued within the statutory period and since the assessment was not completed under S. 144 nor any interest under S. 234A charged which indirectly proved that the assessee, in fact, had filed the letter stating that the return filed originally may be treated as return filed in response to the notice under S. 148. Therefore, the assessment order passed by the AO was not in accordance with law and had to be quashed. (AY. 2011-12)

    Flovel Energy Pvt. Ltd. v. ACIT (2020) 77 ITR 441 (Delhi)(Trib.)

  20. S. 151 : Reassessment – Sanction for issue of notice – Approval granted in mechanical manner and without application of mind – Reopening is not valid. [S. 147, 148]

    Tribunal held that the approval for initiating reassessment proceedings had been granted by the Additional Commissioner mechanically and without application of mind and was not valid because the remarks did not show which material, information, documents and which other aspects he had been gone through and examined for reaching the satisfaction for granting approval. Thereafter, the AO had mechanically issued notice under S. 148 of the Act. The reopening is held to be bad in law. (AY. 2008-09)

    APC Air Systems P. Ltd. v. ITO (2020) 77 ITR 21 (SN)(Delhi)(Trib.)

  21. S. 195: Deduction at source – Non-resident – The payment by an Indian company to a foreign celebrity (Nicholas Cage) for an appearance by him in Dubai, UAE, in a product launch event for promoting the business of the assessee in India, is taxable as arising from a “business connection” and also under Article 23(1) of India-USA tax treaty – Liable to deduct tax at source – DTAA- India-USA [S. 5(2)(b), 9(1), 115BBA, 201, Art. 23(1)]

    Dismissing the appeal of the assessee the Tribunal held that, the payment by an Indian company to a foreign celebrity (Nicholas Cage) for an appearance by him in Dubai, UAE, in a product launch event for promoting the business of the assessee in India, is taxable as arising from a “business connection” and also under Article 23(1) of India-USA tax treaty. Accordingly, the assessee had the liability to withhold taxes from payment made for appearance made by the celebrity at Dubai A8L launch event, and the CIT(A) was justified in upholding impugned demands raised under section 201 r.w.s. 195 of the Income Tax Act, 1961. (ITA No. 2195/Mum/2017, Dt. 19/3/2020) (AY. 2015-16)

    Volkswagen Finance Pvt. Ltd. v. ITO (2020) 115 taxmann.com 386 (Mum.)(Trib.) www.itatonline.org

  22. S. 199: Deduction at source – Credit for tax deducted – Deducutor has deducted the tax at source though failed to deposit the tax with the Govt. deductee cannot be made to suffer – Credit for the tax deducted at source has to be allowed in the hands of the deductee irrespective of whether the same has been deposited by the deductor to the credit of the Central Government or not [S. 205]

    Tribunal held that, in a case where the deductor has deducted tax at source but has not deposited the tax with the Govt., the assessee cannot be made to suffer. U/s. 205, the assesse / deductee cannot be called upon to pay the tax. Credit for the tax deducted at source has to be allowed in the hands of the deductee irrespective of whether the same has been deposited by the deductor to the credit of the Central Government or not. Followed Yashpal Sahani v. Rekha Hajarnavis, [2007] 165 taxman 144 (Bom.)(HC) Sumit Devendra Rajani v. ACIT [2014] 49 taxmann.com 31 (Guj.)(HC) Pushkar Prabhat Chandra Jain v. Union of India [2019] 103 taxmann.com 106 (Bom.)(HC) (ITA No. 5708/Del/2019, Dt. 23/12/2019) (AY. 2015-16)

    Aricent Technologies Holdings Ltd. v. ACIT (Delhi)(Trib.) www.itatonline.org

  23. S. 250: Appeal – Commissioner (Appeals) – Duties – CIT (A) to state point in dispute – Record reasons – Pass speaking order – Matter remanded to decide on merits. [S. 250(6)]

    Tribunal held that sub – S. (6) of S. 250 mandates the CIT (A) to state the point in dispute and thereafter record reasons in support of his conclusion. The finding given by him indicated that the order was not in consonance with the mandate given in the Act. He had not made any analysis of the submissions filed by the assessee or the point raised by him during the assessment proceedings. Therefore, the order was not sustainable. The issue was remitted to adjudicate on the merits. Once the quantum proceedings were set aside, then the very basis to compute penalty was extinguished. The CIT (A) shall adjudicate the issue with regard to the levy of penalty after adjudication of the quantum appeal. (AY. 2011-12)

    Jitendra Narsinhbhai Talpada v. ITO (2020) 77 ITR 47 (SN)(Ahd.)(Trib.)

  24. S. 254(1): Appellate Tribunal – Duties Order – Limitation – Pronouncement – The period of 90 days should be computed by excluding at least the period during which the lockdown due to Covid-19 was in force. [ITAT R. 34(5)]

    On the facts of the case the matter was heard on 7-1-2020 and order was pronounced on 14-5-2020. Tribunal held that Rule 34(5) of the ITAT Rules provides that “ordinarily” the order on an appeal should be pronounced within no more than 90 days from the date of concluding the hearing. A pedantic view of the rule cannot be taken. The period of 90 days should be computed by excluding at least the period during which the lockdown due to Covid-19 was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. (ITA No. 6264/M/18 dt. 14-05-2020) (AY. 2013-14)

    Dy. CIT v. JSW Ltd. (2020) 116 taxmann.com 565 (Mum.)(Trib.) www.itatonline.org

  25. S. 254(2A): Appellate Tribunal – Stay – Video conferencing –Attachment of bank account lifted and stay against coercive recovery granted. [S. 226(3)]

    Tribunal held that as the physical office of the ITAT is not functioning due to the lockdown, the stay petition was heard through video conferencing, from home offices of the respective Members. Attachment of bank account lifted and stay against coercive recovery granted as all of us are traversing through one of the toughest patch of time, facing the Covid 19 pandemic, and the poorer sections of society are hardest hit. It is necessary for every employer company to take care of its employees. The assessee not in a position to perform these obligations in view of the attachment of its bank accounts and debtors. (SA No. 184/Mum/2020 Arising out of ITA No. 189/Mum/2020, dt. 24-4-2020) (AY. 2010-11)

    Pandhes Infracon Pvt. Ltd. v. ACIT (2020) 116 taxmann.com 376 (Mum.)(Trib.) www.itatonline.org

    Editorial: ITAT Mumbai created history by hearing a stay petition, on humane ground during period of complete lockdown, through video conferencing from home offices of Coram Members.

  26. S. 254(2A): Appellate Tribunal – Stay – Garnishee notices – Department should wait till disposal of stay petition – Interim stay is granted and garnishee proceedings placed under suspension till disposal of stay petition [S. 226(3), 254(1)]

    The assessee prayed that the recovery proceedings be stayed till the disposal of the appeal by the Tribunal and to restrain the AO from taking any coercive action as regards recovery of tax, interest and penalty levied or leviable for the assessment year 2013-14 and to forthwith release the attachment of bank accounts. Tribunal held that the hearing of the stay petition was concluded but the order thereon had not been passed. In the meantime, the Department had already issued garnishee notices under S. 226(3) of the Act to the bankers of the assesses. Such undue haste in recovery of the disputed demands, in respect of which the hearing of appeal as also the stay petition had already concluded, was inappropriate. The Department should have at least waited for the disposal of the stay petition. In these circumstances, the garnishee proceedings initiated by the Department should be placed under suspension till the stay petition was disposed of. In the meantime, operation of all the garnishee notices issued by the Department on the bankers of the assessee shall remain suspended. The Department was further directed not to resort to, or continue with, any other coercive measures also, in the meantime, to recover the disputed outstanding demands. (AY. 2013-14)

    Cleared Secured Services Pvt. Ltd. v. Dy. CIT (2020) 77 ITR 93 / 186 DTR 105 / 203 TTJ 657 (SN)(Mum.)(Trib.)

  27. S. 263: Commissioner – Revision of orders prejudicial to revenue – Limitation – Doctrine of merger – Revision on issues not subject matter of reassessment but pertaining to original assessment -Limitation would run from date of order of original assessment and not from date of order of reassessment – Revision barred by limitation [S. 143(3), 147, 263(2)]

    Tribunal held that the three issues raised by the PCIT did not pertain to the reassessment. Thus, the error, if any, committed by the AO related to the original assessment order. Where that part of the order of assessment was found to be prejudicial to interests of the Revenue which had nothing to do with the reassessment proceedings and was never a subject matter of the reassessment proceedings, the doctrine of merger would not apply and the period of limitation provided for in S. 263(2) of the Act would begin to run from the date of order of the original assessment and not from the order of reassessment. Thus, the revisional jurisdiction being beyond the period of limitation was wholly without jurisdiction rendering the entire proceeding a nullity. (AY. 2008-09)

    Shyam Steel Manufacturing Ltd. v. Dy. CIT (2020) 77 ITR 37 (SN)(Kol.)(Trib.)

  28. S. 263: Commissioner – Revision of orders prejudicial to revenue – Interest received by head office is chargeable to tax or not is a debatable issue – Revision cannot be initiated on the basis of retrospective amendment as the AO has to proceed on the basis of law prevailing as on the date of assessments – Revision is held to be not valid – DTAA – India-USA. [S. 9(1)(v)(c), Art. 14(6)]

    Allowing the appeal the Tribunal held that, revision cannot be initiated on the basis of retrospective amendment as the AO has to proceed on the basis of law prevailing as on the date of assessments. Revision is held to be not valid. Whether or not interest received by the Head Office / overseas Branches from the Indian Branch is taxable in India is a highly debatable issue and the position of law prevailing at the time of completion of assessments as per the available judicial precedents on the issue, clearly held that the interest income was not taxable as it is governed by the principle of mutuality. Therefore, it cannot be said that it is not a possible view. (AY. 2011-12, 2012-13)

    JP Morgan Chase Bank N.A. v. Dy. CIT (2020) 185 DTR 305 / 203 TTJ 443 (Mum.)(Trib.)

  29. S. 263: Commissioner – Revision of orders prejudicial to revenue – Closing stock – Limited scrutiny – What cannot be done directly cannot be done indirectly – PCIT in the garb of his revisional jurisdiction u/s. 263 cannot be permitted to traverse beyond the jurisdiction that was vested with the AO while framing the assessment [S. 115JB, 142(1), 143(3)]

    Tribunal held that when the case of the assessee was selected for limited scrutiny for the reasons viz. (i). Large other expenses claimed in the P&L A/c.; and (ii). Low income in comparison High Loans / advance / Investment in shares, therefore, no infirmity could be attributed to the assessment framed by the AO on the ground that he had failed to deal with other issues which though did not fall within the realm of the limited reasons for which the case was selected for scrutiny assessment. PCIT in the garb of his revisional jurisdiction u/s. 263 cannot be permitted to traverse beyond the jurisdiction that was vested with the AO while framing the assessment. Revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was vested with the AO while framing the assessment. As a matter of fact, what cannot be done directly cannot be done indirectly. Accordingly, in terms of our aforesaid observations, we are of the considered view that as the A.O had aptly confined himself to the issues for which the case of the assessee was selected for limited scrutiny, therefore, no infirmity can be attributed to his order, for the reason, that he had failed to dwell upon certain other issues which did not form part of the reasons for which the case was selected for limited scrutiny under CASS. Revision order was quashed. (AY. 2014-15)

    Suraj Diamond Dealers Pvt. Ltd. v. PCIT (2020) 185 DTR 1 / 203 TTJ 127 (Mum.)(Trib.)

  30. S. 271(1)(c): Penalty – Concealment – Inapplicable words in notice not struck off – Penalty order not specifying exactly under which limb penalty is levied – Penalty is held to be unjustified. [S. 274]

    The AO levied penalty which was confirmed by the CIT (A) on appeal the Tribunal held that notices under S. 274 read with S. 271(1)(c) issued to the assessee showed the inapplicable words in the notice had not been struck out. Even the last line of the notice only spoke of S. 271 and did not mention of S. 271(1)(c). The penalty order was based on furnishing of inaccurate particulars but the notice did not specify exactly under which limb the penalty under S. 271(1)(c) had been initiated. The AO was not sure under which limb of provisions of S. 271 the assessee was liable for penalty. The penalty levied under S. 271(1)(c) was not sustainable. (AY. 2011-12).

    Dibyajyoti Chemicals P. Ltd. v. Dy. CIT (2020) 77 ITR 40 (SN)(Cuttack)(Trib.)

  31. S. 271(1)(c): Penalty – Concealment – Vague allegation – Not specifying specific charge – Levy of penalty is not valid [S. 274]

    Tribunal held that notice under S. 274 should specifically state the grounds mentioned in S. 271(1)(c), i.e., whether it is for concealment of income or for furnishing of inaccurate particulars of income and sending a printed form where all the grounds mentioned in S. 271 are mentioned would not satisfy requirement of law. The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended. On the basis of such proceedings, no penalty could be imposed to the assessee. Accordingly, that in each of the notices issued by the AO under S. 274, the AO alleged that the assessee had concealed the particulars of his income or had furnished inaccurate particulars of such income. The allegation was vague and no penalty could be levied. (AY. 2009-10 to 2014-15)

    Harshvardhan v. Dy. CIT (2020) 77 ITR 81 (SN)(Bang.)(Trib.)

  32. S. 271B : Penalty – Failure to get accounts audited – Civil contractor – Failure to keep and maintain books of account – No prescribed format for maintenance of books of account – Levy of penalty is not justified either u/s. 271A or u/s. 271B of the Act. [S. 44AB, 271A]

    Tribunal held, that since no format of books of account were prescribed under the Rules for civil contracts, penalty under S. 271A was not justified. When no penalty under S. 271A was leviable, penalty under S. 271B also could not be levied for non-audit as prescribed under S. 44AB of the Act. (AY. 2009-10 to 2014-15)

    Harshvardhan v. Dy. CIT (2020) 77 ITR 81 (SN)(Bang.)(Trib.)

  33. S. 271D: Penalty – Takes or accepts any loan or deposit – Money returned to father – Receipt of money from family members for medical emergency – Receipt of money from member of association for building school – Neither loan or advances – Levy of penalty is held to be not justified. [S. 269SS, 273B]

    Tribunal held that, money returned to father, receipt of money from family members for medical emergency and receipt of money from member of association for building school is neither loan or advances hence levy of penalty is held to be not justified. (AY. 2013-14)

    Gourang Chandra Nayak v. Jt. CIT (2020) 77 ITR 192 (Cuttack)(Trib.)

  34. S. 2(42A) : Short-term capital asset – Shares of unlisted company – Holding shares for more than 12 months and transferring them prior to 31-3-2014 to be treated as long term capital gains – Holding Shares for more than 12 months and transferring them prior to 31-3-2014 – Entitled to benefit of shorter period of holding – Gains to be Treated as long-term. [S. 2(29A), 2(29B), 45]

    The assessee bifurcated income from capital gains on sale of shares into short-term capital gains and the long-term capital gains. The assessee purchased the shares in the financial year 2012-13 and sold them in the assessment year 2014-15, she computed the indexed cost of acquisition of those shares. These shares were sold on March 21, 2014 and thus she claimed long-term capital gains. The AO held that the shares were held for less than 36 months and they were short-term capital assets. According to the provisions of S. 2(42A) of the Act the AO held that shares of an unlisted company, if held for less than 36 months, were not a long-term capital asset but a short-term capital asset. The CIT(A) gave partial relief. On appeal the Tribunal held that the benefit of the shorter period of holding of 12 months to qualify as long-term capital asset in respect of unlisted shares had been removed prospectively from the AY. 2015-16 and not for earlier years. The benefit of the shorter period for holding of unlisted shares would be available when such shares were transferred during the period beginning on April 1, 2014 and ending on July 10, 2014. Post-July 11, 2014 the benefit of the shorter period of unlisted shares could not be applicable. The shares had been transferred by the assessee prior to March 31, 2014. Therefore, the newly amended section would not be applicable and the assessee would get the benefit of the shorter period, i.e., period of less than 36 months as given in S. 2(42A) read with the proviso thereto in terms of the provision as it existed for the assessment year 2014-15. Thus, the authority was not justified in reclassifying the long-term capital gains as short-term capital gains. Accordingly, the gains on transfer of shares of Shares would be taxable as long-term capital gains as the assessee had held those shares for more than 12 months. (AY. 2014-15)

    Neelu Analjit Singh (Mrs.) v. Add. CIT (2020) 77 ITR 220 (Delhi)(Trib)

  35. S. 10(13A): House rent allowance – Qualifying amount – Ten Per Cent of Salary – Performance bonus – Does not form part of salary for purpose of S. 10(13A) Entitled to allowance at 10% of salary excluding performance bonus [R. 2A]

    Tribunal held that the performance bonus does not form part of salary as defined in Rule 2A for the purposes of S. 10(13A). The total rent paid by the assessee during the year 2011-12 was ₹ 8.20 lakhs. The basic salary for the purpose of computation of house rent disallowance was ₹ 3 lakhs (10 per cent of ₹ 30 lakhs being the basic salary). Therefore, the excess of rent paid over 10 per cent of salary was ₹ 5.20 lakhs (₹ 8.20 lakhs – ₹ 3 lakhs). Therefore, the assessee was entitled to house rent allowance at ₹ 5.20 lakhs under S. 10(13A) of the Act. The AO was directed to allow the exemption of house rent allowance at ₹ 5.20 lakhs. (AY. 2011-12)

    Sudip Rungta v. Dy. CIT (2020) 77 ITR 63 (SN)(Kol.)(Trib)

  36. S. 10A: Free trade zone – Special economic zones – Conversion of Export processing zone unit into special economic zone unit – Exemption cannot be denied

    Tribunal held that period of ten consecutive AYs shall be reckoned from AY relevant to previous year in which unit begins to manufacture or produce or process such articles or things or service in such free trade zone or export processing zone. Entitled to exemption for period of ten consecutive AY and S. 10A(1) is continuously applicable to unit even after being converted into special economic zone unit keeping in view the second Proviso to S. 10A (1). (AY. 2011-12)

    Classic Linens International P. Ltd. v. Dy. CIT (2020) 77 ITR 1 (Chennai)(Trib.)

  37. S. 11: Property held for charitable purposes – Trust – Beneficiaries a group of individuals – Does not mean association of persons – Assessee to be treated an individual. [S. 2(31)(v), 12A]

    Tribunal held that the trust was treated as an individual. Therefore, the AO was to tax the assessee treating it as an individual instead of an association of persons. The fact that the beneficiaries were a group of individuals did not mean that the liability of the assessee was of the association of persons. The term “individual” does not mean a single living human being. It can include a body of individuals constituting a unit for the purposes of the Act. Even though the assessment of income was in the hands of the Trust, it had to be made in the same manner and to the same extent as it would have been made in the hands of the beneficiaries. (AY. 2012-13)

    Saraswat Hitwardhak v. ITO (2020) 77 ITR 89 (SN)(Mum.)(Trib.)

  38. S. 22 : Income from house property – Deemed owner – Income from house property – Income from business – Sub-letting of property – Leasing of property for a period exceeding 12 years – Lease rental is assessable as income from house property and not as business income. [S. 27(iiib), 28 (i), 56, 269UA(f)]

    Tribunal held that, leasing of property for a period exceeding 12 years. Lease rental is assessable as income from house property and not as business income. (AY. 1990-91 to 1992-93, 1994-95, 1998-99, 2000-01 to 2003-04)

    Nahalchand Laloochand P. Ltd. v. Dy. CIT (2020) 77 ITR 664 (Mum.)(Trib.)

  39. S. 22: Income from house property – Business income – Unsold flats – Stock in trade – No rental income to be computed when flats held as stock-in-trade [S. 23(5), 28(i)]

    The assessee is a builder and developer. During the course of assessment proceedings it was found that the assessee had on hand unsold flats and shops. The AO computed the notional rental on such stock-in-trade under the head “Income from house property” at ₹ 5,54,400. The CIT (A) upheld the contention of assessee in taxing the income as income from business. On appeal the Tribunal held that no rental income could be computed when the flats were held as stock-in-trade. The Finance Act, 2017 with effect from April 1, 2018 has inserted sub-section (5) of section 23 which has the effect of providing that from the assessment year 2018-19, stock-in-trade of buildings, etc., shall be liable to be considered for computation of annual value under the head “Income from house property” after two years from the end of the financial year in which the certificate of completion of construction of the property is obtained. As the assessment year was 2015-16, the amended S. 23 would not apply. (AY. 2015-16)

    Rafiahamad Rasul Patel v. ITO (2020) 77 ITR 16 (SN)(Pune) (Trib)

  40. S. 23: Income from house property – Business income – Annual letting value – Non-resident Director – Flat used as residence as well as carrying on business – Notional value from property cannot be assessed as income from house property. [S. 22, 23(1), 23(4), 28(i)]

    Assessee owning flat and giving to Non-resident director for residence as well as carrying on business therein. Tribunal held that flat a business asset used partly for business and partly for residence of both shareholder directors, notional income from property cannot be assessed as income from house property.
     (AY. 2013-14)

    Record Investments and Leasing Pvt. Ltd. v. ITO (2020) 77 ITR 76 (SMC)(SN)(Mum.)(Trib.)

  41. S. 32 : Depreciation – Survey – Statement on oath – Merely on the basis of statement made in the course of survey – Depreciation cannot be disallowed. [S. 133A]

    Tribunal held that merely on the basis of statement made in the course of survey depreciation cannot be disallowed when the assessee has produced the reconciliation chart of plant and machinery with Dalal Mott Macdonald report were also submitted to the effect that machines were very much there and inspection was duly carried out by the surveyor. And Valuation Report certificate dated 26-5-2003 wherein before granting loan IDBI Bank carried out inspection and Valuation Report was duly prepared wherein details of all the machines were given. (AY. 2002-03, 2005-06)

    Shree Rama Multi-Tech Ltd. v. Dy. CIT (2020) 185 DTR 163 / 203 TTJ 129 (Ahd.)(Trib.)

  42. S. 40(a)(ia): Amounts not deductible – Deduction at source – Labour charges – Failure to deduct tax at source – As per amendment brought to Finance Act, 2014 in S. 40(a)(ia) w.e.f.
     1-4-2015, disallowance is restricted to 30% of amount of expenditure claimed – Amendment is applicable to retrospective effect. [S. 194C, 194H]

    The assessee had claimed labour charges, Architect Fees and towards expenses under head commission, which were in nature of payments made towards contract payment u/s. 194C, professional fees payment u/s. 194H and commission payment u/s. 194H. Assessee had also failed to deposit TDS amount so deducted from payments made towards expenses on account of labour charges, professional fees and commission to Central Govt. A/c within specified time limit. AO made disallowance u/s 40(a)(ia) of the Act. CIT(A) confirmed the disallowance. On appeal the Tribunal held that as per amendment brought to Finance Act, 2014 in s. 40(a)(ia) w.e.f. 1-4-2015 if 100% disallowance made u/s 40(a)(ia), that would be restricted to 30% only giving retrospective effect. Intent of legislature to reduce hardship, it was proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in s. 40(a)(ia), disallowance should be restricted to 30% of amount of expenditure claimed. (AY. 2014-15)

    Om Sri Nilamadhab Builders Pvt. Ltd. v. ITO (2020) 185 DTR 201 / 203 TTJ 229 (CTK.)(Trib.)

  43. S. 40(b)(iii): Amounts not deductible – Working partner – Remuneration – Interest – Rejection of books of account and assessment adopting 8 Per cent. of gross turnover as net profit – Separate deduction towards interest on partner’s capital account and remuneration to partner is to be allowed, when net profit is estimated from gross receipts. [S. 133A]

    Tribunal held, that the partnership deed contained a provision for interest on capital at 12 per cent per annum and clause 17 provided for remuneration to whole time working partners and the method of computation of remuneration. By a supplementary deed the manner of paying remuneration to the whole time working partners had been revised. In the assessment years 2009-10 to 2011-12, the assessee had claimed interest on capital and remuneration to the partners, which was verifiable from the computation of income. The AO was directed to allow remuneration to the partners and interest on capital as per the provisions of law. Interest on the partners’ capital account and remuneration to partners was allowable as deduction even after estimation of the net profit from the gross receipts. (AY. 2012-13)

    Mayasheel Construction v. Dy. CIT (2020) 77 ITR 8 (SN)(Delhi)(Trib.)

  44. S. 54: Capital gains – Profit on sale of property used for residence – Purchase of residential house – Land purchased admeasuring 4973.125 square Feet – Building constructed of 150 square feet – only 25 per cent. of total plot area to be considered as land appurtenant thereto [S. 45]

    The assessee held a plot of land of 4973.125 square feet. It had building of 220 square feet on the plot of land which was even less than 5 per cent of the total plot of land. Thus, it could not be said that the rest of the plot of land was appurtenant to the building of 220 square feet existing on the plot of land for enjoyment of the building. The assessee had claimed that there was open space which was used for car park, septic tank, garden, etc. These open spaces may be an integral part but certainly these were not required to enjoy the building of 220 square feet on the plot of land of 4973.125 square feet. Both the authorities had concurred that 25 per cent. of the total plot area to be considered land appurtenant thereto. It could not be said that the estimation done by the authorities was perverse or without any reasonable basis. (AY. 2013-14)

    Maduranthagam Selvaraj Ravi v. Dy. CIT (2020) 77 ITR 6 (SN)(Chennai)(Trib.)

  45. S. 54: Capital gains – Profit on sale of property used for residence – No requirement that construction of house should have been completed within specified time – Matter remanded for verification. [S. 45]

    Tribunal held that the requirement of S. 54 of the Act is for the assessee to have either purchased a residential house, being a new asset, within the stipulated period or constructed a residential house within a period of three years from the date of transfer. The section does not prescribe the completion of construction of residential house and the thrust was on the investment of net consideration received on sale of original asset and start of construction of a new residential house. It was incorrect to insist that the assesse should establish that the residential house was complete and then ask for benefit under s. 54. Since no documentary evidence had been furnished and only a claim had been made, the issue was restored to the file of the AO. (AY. 2013-14)

    Rakesh Kumar Kalra v. ITO (2020) 77 ITR 36 (SN)(Delhi)(Trib.)

  46. S. 64 : Clubbing of income – Set-off of business loss of the wife in the assessment of husband – Entire amount of loss resulting from the business started by wife with the gifts received from her husband is liable to be clubbed in the hands of the assessee.
     [S. 64(1)(iv)]

    The assessee filed return declaring total income of ₹ 4,59,830/- comprising, inter alia, Business income. During the course of assessment proceedings, the AO observed from the computation of total income that the assessee clubbed loss from the business of his spouse amounting to ₹ 31,56,429/- in view of the provisions of S. 64 of the Act. On being called upon to justify such a claim, the assessee submitted that during the year under consideration he gifted a sum of ₹ 94.50 lakh to Mrs. Priti Bhaskarwar, his wife, who started business of Futures and Options (F&O) on 18-9-2013. The assessee claimed that she incurred loss of ₹ 31,56,429/- in such business, which was clubbed in his hands. The AO accepted the primary claim of the assessee of his wife having incurred loss of ₹ 31.56 lakh in the business of F&O, which was set up on 18-9-2013 and further that loss from such business was eligible for set off against the income of the assessee in terms of S. 64(1)(iv) read with Explanation 3 thereto. He, however, did not accept the assessee’s contention that the entire loss of ₹ 31.56 lakh be set off against the assessee’s income. CIT(A) also affirmed the order of the AO. On appeal the Tribunal held that, entire amount of loss resulting from the business started by wife with the gifts received from her husband is liable to be clubbed in the hands of the assessee. (AY. 2014-15)

    Uday Gopal Bhaskarwar v. ACIT (2020) 186 DTR 65 / 203 TTJ 776 (SMC)(Pune)(Trib.)

  47. S. 68: Cash credits – Penny stock – Bogus capital gains – Not sufficiently discharged the onus on proving the source of deposits – Addition is restricted to 30% with the a rider that same shall not be treated as a precedent to other assessment years [S. 10(38), 45]

    The assessee has produced documentary evidence in respect of sale of shares to demonstrate that the capital gains on sale of shares is exempt from tax. Tribunal held that as the detailed explanation of the assessee does not sufficiently discharge the onus on proving the source of impugned deposits, the impugned addition should be restricted to 30% only with a rider that same shall not be treated as a precedent in any other assessment year. (ITA No. 1790-1791/Kol/2019 Dt. 14-2-2020)
     (AY 2014-15 & 2015-16)

    Neha Chowdhary v. ITO (SMC)(Kol.)(Trib.) www.itatonline.org

  48. S. 69: Undisclosed investments – Bogus capital gains – Penny stocks – Explanation is not sufficient to discharge the liability – Addition is restricted to 30% with a rider that same shall not be treated as a precedent in any other assessment year. [S. 10(38), 45, 68, 143(3)]

    The assessee is a salaried person who was sold her stock holding in shares in the relevant two previous years. AO treated as unexplained income since assessee could not prove source thereof during the course of scrutiny as well as in the lower appellate proceedings. Tribunal held that the fact remains that her detailed explanation tendered in the course of assessment does not sufficiently discharge her onus on proving the source of impugned deposits. Accordingly considering peculiar facts and circumstances that the addition(s) of ₹ 17,88,666/- and ₹ 16,53,772/- are restricted to that @ 30% only with a rider that same shall not be treated as a precedent in any other assessment year. The assessee gets part relief accordingly. (ITA No. 1790-1791/Kol/2019, dt. 14-2-2020) (AY. 2014-15, 2015-16)

    Neha Chowdhary v. ITO (SMC)(Kol.)(Trib.) www.itatonline.org

  49. S. 69: Unexplained investments – Books of account not audited – Net profit to be estimated at 8% – Cash gift from relatives – Mother in law – Relative – Agricultural income – No reason to doubt genuineness and creditworthiness of source – Addition is not justified. [S. 56, Explanation, (e), 68]

    Tribunal held that the assessee had not shown the business receipts and income under the head business income but this could not preclude the assessee from claiming incidental expenses incurred for carrying out business. Though assessee had declared 6.28 per cent. net profit rate on the transport business on the gross receipts of ₹ 19,88,592, an estimate of net profit at 8 per cent. of the gross receipts of ₹ 19,88,592, i.e., ₹ 1,59,087 would be justified. As regards the gifts of ₹ 10 lakhs and ₹ 2.50 lakhs were received in cash. During the course of appellate proceeding the assessee placed sufficient documentary evidence to prove the identity, genuineness and creditworthiness of the donors. The gift of ₹ 10 lakhs received from the assessee’s mother-in-law who was said to be the owner of around 50 acres agricultural land receiving regular income from agricultural proceeds for many years. The gift deed was duly notarised and she had declared her accumulated capital, stridhan and income from gift received from her husband who was earning regular agricultural income, was the source of the gift given to her son-in-law. The fact that the mother-in-law had regular source of agricultural income and the authenticity of gift deed had not been disputed. She was also “relative” of the assessee as provided in clause (e) of Explanation to S. 56. There was no reason to doubt the genuineness and creditworthiness of the gift at ₹ 10 lakhs. (AY. 2010-11)

    Vinod Kumar Jain v. ITO (2020) 77 ITR 83 (SN)(Indore)(Trib.)

  50. S. 70 : Set off of loss – Long term capital loss against long term capital gains – Long term capital loss arising out of sale of shares cannot be set off against long-term capital gain from sale of shares subjected to STT and claimed exempt u/s. 10(38) – Directed the AO to allow carry forward of long term capital loss as claimed by the assessee.
     [S. 2(14), 10(38), 45, 74]

    The assessee had long term capital gain of ₹ 519,21,44,332 on which it has paid Securities Transaction Tax (STT) hence, claimed as exempt u/s. 10(38) of the Act. In the course of assessment proceedings, the AO noticed that the assessee had claimed carry forward of long term capital loss from sale of shares, though STT paid, at ₹ 31,00,52,918. However, the assessee has not set off long term capital loss against long term capital gain. Therefore, he called upon the assessee to explain why such long term capital loss should not be set off against long term capital gain and carry forward of loss to such extent should not be disallowed. In response, it was submitted by the assessee that as per S. 10(38) of the Act, only income arising from long term capital gain on sale of shares subjected to STT is exempt u/s. 10(38) of the Act. Thus, it does not include loss arising out of sale of shares. The AO however, did not find merit in the submissions of the assessee. He observed, the term income as used in S. 10(38) refers to the entire receipts arising from transfer of long term capital asset and also includes loss. Accordingly, he set off the long term capital loss against the exempt long term capital gain, which resulted in part disallowance of carry forward of long term capital loss. The aforesaid decision of the AO was also upheld by the CIT(A). The Tribunal held that the long term capital loss arising out of sale of shares cannot be set off against long term capital gain from shares subjected to STT and claimed exempt u/s. 10(38) of the Act. Accordingly directed the AO to allow carry forward of long term capital loss as claimed by the assessee. (AY. 2007-08)

    Nomura India Investment Fund Mother Fund v. ADIT (IT) (2020) 186 DTR 212 / 203 TTJ 212 (Mum.)(Trib.)

  51. S. 143(3): Assessment – Survey – Difference in stock – Statement recorded during survey not under oath – Retraction of statement with explanation – Addition is held to be not justified. [S. 133A]

    Allowing the appeal of the assessee the Tribunal held that, merely on the basis of statement, addition cannot be when the statement was retracted and detailed explanation with supporting evidence was fled in the course of assessment proceedings. The Tribunal held that the AO had simply ignored the evidence and had made the addition merely on the basis of the letter submitted by the assessee which stood retracted later. Moreover, the surrender was not under oath. The Assessing Officer had not brought any material to rebut the explanation of the assessee. S. 133A does not empower any Income-tax authority to examine any person on oath and therefore any admission made in a statement recorded during survey cannot by itself be made the basis of addition. Thus the addition was not tenable in the eyes of law and was deleted. (AY. 2012-13)

    MNP Turnmatics v. ITO (2020) 77 ITR 31 (SN)(Delhi)(Trib.)

  52. S. 148: Reassessment – Notice – Reply stating that original return filed should be treated as return filed in repose to notice u/s. 148 – Postal receipt is filed – Neither notice u/s. 143(2) is issued nor assessment completed u/s. 144 of the Act nor interest charged u/s. 234A – Reassessment is held to be not valid [S. 139, 143(2), 144, 147, 234A]

    Tribunal held that the notice under S. 148 was issued on the same date, the objection of the assessee for such reopening was disposed of by the AO passing a speaking order on the same date, the reassessment orders for both the years were passed on the same date and the CIT (A) also had passed the appellate orders for both the years separately on the same date. Therefore, it could not be said that the assessee had filed the reply for treating the earlier return as the return in response to the notice under S. 148 only for the AY. 2010-11 and not for the AY. 2011-12, especially when the postal receipts for both the speed posts were also on the same date. Since, the assessee filed the letter stating that the return filed originally may be treated as return filed in response to the notice under S. 148 and since the notice under S. 143(2) was not issued within the statutory period and since the assessment was not completed under S. 144 nor any interest under S. 234A charged which indirectly proved that the assessee, in fact, had filed the letter stating that the return filed originally may be treated as return filed in response to the notice under S. 148. Therefore, the assessment order passed by the AO was not in accordance with law and had to be quashed. (AY. 2011-12)

    Flovel Energy Pvt. Ltd. v. ACIT (2020) 77 ITR 441 (Delhi)(Trib.)

  53. S. 151 : Reassessment – Sanction for issue of notice – Approval granted in mechanical manner and without application of mind – Reopening is not valid. [S. 147, 148]

    Tribunal held that the approval for initiating reassessment proceedings had been granted by the Additional Commissioner mechanically and without application of mind and was not valid because the remarks did not show which material, information, documents and which other aspects he had been gone through and examined for reaching the satisfaction for granting approval. Thereafter, the AO had mechanically issued notice under S. 148 of the Act. The reopening is held to be bad in law.
     (AY. 2008-09)

    APC Air Systems P. Ltd. v. ITO (2020) 77 ITR 21 (SN)(Delhi)(Trib.)

  54. S. 195: Deduction at source – Non-resident – The payment by an Indian company to a foreign celebrity (Nicholas Cage) for an appearance by him in Dubai, UAE, in a product launch event for promoting the business of the assessee in India, is taxable as arising from a “business connection” and also under Article 23(1) of India-USA tax treaty – Liable to deduct tax at source – DTAA-India-USA [S. 5(2)(b), 9(1), 115BBA, 201, Art. 23(1)]

    Dismissing the appeal of the assessee the Tribunal held that, the payment by an Indian company to a foreign celebrity (Nicholas Cage) for an appearance by him in Dubai, UAE, in a product launch event for promoting the business of the assessee in India, is taxable as arising from a “business connection” and also under Article 23(1) of India-USA tax treaty. Accordingly, the assessee had the liability to withhold taxes from payment made for appearance made by the celebrity at Dubai A8L launch event, and the CIT(A) was justified in upholding impugned demands raised under section 201 r.w.s. 195 of the Income Tax Act, 1961. (ITA No. 2195/Mum/2017, Dt. 19-3-2020) (AY. 2015-16)

    Volkswagen Finance Pvt. Ltd. v. ITO (2020) 115 taxmann.com 386 (Mum.)(Trib.) www.itatonline.org

  55. S. 199: Deduction at source – Credit for tax deducted – Deducutor has deducted the tax at source though failed to deposit the tax with the Govt. deductee cannot be made to suffer – Credit for the tax deducted at source has to be allowed in the hands of the deductee irrespective of whether the same has been deposited by the deductor to the credit of the Central Government or not
     [S. 205]

    Tribunal held that, in a case where the deductor has deducted tax at source but has not deposited the tax with the Govt., the assessee cannot be made to suffer. U/s. 205, the assesse / deductee cannot be called upon to pay the tax. Credit for the tax deducted at source has to be allowed in the hands of the deductee irrespective of whether the same has been deposited by the deductor to the credit of the Central Government or not. Followed Yashpal Sahani v. Rekha Hajarnavis, [2007] 165 taxman 144 (Bom.)(HC), Sumit Devendra Rajani v. ACIT [2014] 49 taxmann.com 31 (Guj.)(HC), Pushkar Prabhat Chandra Jain v. Union of India [2019] 103 taxmann.com 106 (Bom.)(HC), (ITA No. 5708/Del/2019, Dt. 23-12-2019) (AY. 2015-16)

    Aricent Technologies Holdings Ltd. v. ACIT (Delhi)(Trib.) www.itatonline.org

  56. S. 250: Appeal – Commissioner (Appeals) – Duties – CIT (A) to state point in dispute – Record reasons – Pass speaking order – Matter remanded to decide on merits. [S. 250(6)]

    Tribunal held that sub-S. (6) of S. 250 mandates the CIT (A) to state the point in dispute and thereafter record reasons in support of his conclusion. The finding given by him indicated that the order was not in consonance with the mandate given in the Act. He had not made any analysis of the submissions filed by the assessee or the point raised by him during the assessment proceedings. Therefore, the order was not sustainable. The issue was remitted to adjudicate on the merits. Once the quantum proceedings were set aside, then the very basis to compute penalty was extinguished. The CIT (A) shall adjudicate the issue with regard to the levy of penalty after adjudication of the quantum appeal. (AY. 2011-12)

    Jitendra Narsinhbhai Talpada v. ITO (2020) 77 ITR 47 (SN)(Ahd.)(Trib.)

  57. S. 254(1): Appellate Tribunal – Duties Order – Limitation – Pronouncement – The period of 90 days should be computed by excluding at least the period during which the lockdown due to Covid-19 was in force. [ITAT R. 34(5)]

    On the facts of the case the matter was heard on 7-1-2020 and order was pronounced on 14-5-2020. Tribunal held that Rule 34(5) of the ITAT Rules provides that “ordinarily” the order on an appeal should be pronounced within no more than 90 days from the date of concluding the hearing. A pedantic view of the rule cannot be taken. The period of 90 days should be computed by excluding at least the period during which the lockdown due to Covid-19 was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. (ITA No. 6264/M/18
     dt. 14-5-2020) (AY. 2013-14)

    Dy. CIT v. JSW Ltd. (2020) 116 taxmann.com 565 (Mum.)(Trib.) www.itatonline.org

  58. S. 254(2A): Appellate Tribunal – Stay – Video conferencing – Attachment of bank account lifted and stay against coercive recovery granted. [S. 226(3)]

    Tribunal held that as the physical office of the ITAT is not functioning due to the lockdown, the stay petition was heard through video conferencing, from home offices of the respective Members. Attachment of bank account lifted and stay against coercive recovery granted as all of us are traversing through one of the toughest patch of time, facing the Covid 19 pandemic, and the poorer sections of society are hardest hit. It is necessary for every employer company to take care of its employees. The assessee not in a position to perform these obligations in view of the attachment of its bank accounts and debtors. (SA No. 184/Mum/2020 Arising out of ITA No. 189/Mum/2020, dt. 24-4-2020)
     (AY. 2010-11)

    Pandhes Infracon Pvt. Ltd. v. ACIT (2020) 116 taxmann.com 376 (Mum.)(Trib.) www.itatonline.org

    Editorial: ITAT Mumbai created history by hearing a stay petition, on humane ground during period of complete lockdown, through video conferencing from home offices of Coram Members.

  59. S. 254(2A): Appellate Tribunal – Stay – Garnishee notices – Department should wait till disposal of stay petition – Interim stay is granted and garnishee proceedings placed under suspension till disposal of stay petition [S. 226(3), 254(1)]

    The assessee prayed that the recovery proceedings be stayed till the disposal of the appeal by the Tribunal and to restrain the AO from taking any coercive action as regards recovery of tax, interest and penalty levied or leviable for the assessment year 2013-14 and to forthwith release the attachment of bank accounts. Tribunal held that the hearing of the stay petition was concluded but the order thereon had not been passed. In the meantime, the Department had already issued garnishee notices under S. 226(3) of the Act to the bankers of the assesses. Such undue haste in recovery of the disputed demands, in respect of which the hearing of appeal as also the stay petition had already concluded, was inappropriate. The Department should have at least waited for the disposal of the stay petition. In these circumstances, the garnishee proceedings initiated by the Department should be placed under suspension till the stay petition was disposed of. In the meantime, operation of all the garnishee notices issued by the Department on the bankers of the assessee shall remain suspended. The Department was further directed not to resort to, or continue with, any other coercive measures also, in the meantime, to recover the disputed outstanding demands. (AY. 2013-14)

    Cleared Secured Services Pvt. Ltd. v. Dy. CIT (2020) 77 ITR 93 / 186 DTR 105 / 203 TTJ 657 (SN)(Mum.)(Trib.)

  60. S. 263: Commissioner – Revision of orders prejudicial to revenue – Limitation – Doctrine of merger – Revision on issues not subject matter of reassessment but pertaining to original assessment – Limitation would run from date of order of original assessment and not from date of order of reassessment – Revision barred by limitation [S. 143(3), 147, 263(2)]

    Tribunal held that the three issues raised by the PCIT did not pertain to the reassessment. Thus, the error, if any, committed by the AO related to the original assessment order. Where that part of the order of assessment was found to be prejudicial to interests of the Revenue which had nothing to do with the reassessment proceedings and was never a subject matter of the reassessment proceedings, the doctrine of merger would not apply and the period of limitation provided for in S. 263(2) of the Act would begin to run from the date of order of the original assessment and not from the order of reassessment. Thus, the revisional jurisdiction being beyond the period of limitation was wholly without jurisdiction rendering the entire proceeding a nullity. (AY. 2008-09)

    Shyam Steel Manufacturing Ltd. v. Dy. CIT (2020) 77 ITR 37 (SN)(Kol.)(Trib.)

  61. S. 263: Commissioner – Revision of orders prejudicial to revenue – Interest received by head office is chargeable to tax or not is a debatable issue – Revision cannot be initiated on the basis of retrospective amendment as the AO has to proceed on the basis of law prevailing as on the date of assessments – Revision is held to be not valid – DTAA – India-USA. [S. 9(1)(v)(c), Art. 14(6)]

    Allowing the appeal the Tribunal held that, revision cannot be initiated on the basis of retrospective amendment as the AO has to proceed on the basis of law prevailing as on the date of assessments. Revision is held to be not valid. Whether or not interest received by the Head Office / overseas Branches from the Indian Branch is taxable in India is a highly debatable issue and the position of law prevailing at the time of completion of assessments as per the available judicial precedents on the issue, clearly held that the interest income was not taxable as it is governed by the principle of mutuality. Therefore, it cannot be said that it is not a possible view.
     (AY. 2011-12, 2012-13)

    JP Morgan Chase Bank N.A. v. Dy. CIT (2020) 185 DTR 305 / 203 TTJ 443 (Mum.)(Trib.)

  62. S. 263: Commissioner – Revision of orders prejudicial to revenue – Closing stock – Limited scrutiny – What cannot be done directly cannot be done indirectly – PCIT in the garb of his revisional jurisdiction u/s. 263 cannot be permitted to traverse beyond the jurisdiction that was vested with the AO while framing the assessment [S. 115JB, 142(1), 143(3)]

    Tribunal held that when the case of the assessee was selected for limited scrutiny for the reasons viz. (i). Large other expenses claimed in the P&L A/c.; and (ii). Low income in comparison High Loans / advance / Investment in shares, therefore, no infirmity could be attributed to the assessment framed by the AO on the ground that he had failed to deal with other issues which though did not fall within the realm of the limited reasons for which the case was selected for scrutiny assessment. PCIT in the garb of his revisional jurisdiction u/s. 263 cannot be permitted to traverse beyond the jurisdiction that was vested with the AO while framing the assessment. Revisional jurisdiction cannot be exercised for broadening the scope of jurisdiction that was vested with the AO while framing the assessment. As a matter of fact, what cannot be done directly cannot be done indirectly. Accordingly, in terms of our aforesaid observations, we are of the considered view that as the A.O had aptly confined himself to the issues for which the case of the assessee was selected for limited scrutiny, therefore, no infirmity can be attributed to his order, for the reason, that he had failed to dwell upon certain other issues which did not form part of the reasons for which the case was selected for limited scrutiny under CASS. Revision order was quashed. (AY. 2014-15)

    Suraj Diamond Dealers Pvt. Ltd. v. PCIT (2020) 185 DTR 1 / 203 TTJ 127 (Mum.)(Trib.)

  63. S. 271(1)(c): Penalty – Concealment – Inapplicable words in notice not struck off – Penalty order not specifying exactly under which limb penalty is levied – Penalty is held to be unjustified. [S. 274]

    The AO levied penalty which was confirmed by the CIT (A) on appeal the Tribunal held that notices under S. 274 read with S. 271(1)(c) issued to the assessee showed the inapplicable words in the notice had not been struck out. Even the last line of the notice only spoke of S. 271 and did not mention of S. 271(1)(c). The penalty order was based on furnishing of inaccurate particulars but the notice did not specify exactly under which limb the penalty under S. 271(1)(c) had been initiated. The AO was not sure under which limb of provisions of S. 271 the assessee was liable for penalty. The penalty levied under S. 271(1)(c) was not sustainable. (AY. 2011-12)

    Dibyajyoti Chemicals P. Ltd. v. Dy. CIT (2020) 77 ITR 40 (SN)(Cuttack)(Trib.)

  64. S. 271(1)(c): Penalty – Concealment – Vague allegation – Not specifying specific charge – Levy of penalty is not valid [S. 274]

    Tribunal held that notice under S. 274 should specifically state the grounds mentioned in S. 271(1)(c), i.e., whether it is for concealment of income or for furnishing of inaccurate particulars of income and sending a printed form where all the grounds mentioned in S. 271 are mentioned would not satisfy requirement of law. The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended. On the basis of such proceedings, no penalty could be imposed to the assessee. Accordingly, that in each of the notices issued by the AO under S. 274, the AO alleged that the assessee had concealed the particulars of his income or had furnished inaccurate particulars of such income. The allegation was vague and no penalty could be levied. (AY. 2009-10 to 2014-15)

    Harshvardhan v. Dy. CIT (2020) 77 ITR 81 (SN)(Bang.)(Trib.)

  65. S. 271B : Penalty – Failure to get accounts audited – Civil contractor – Failure to keep and maintain books of account – No prescribed format for maintenance of books of account – Levy of penalty is not justified either u/s. 271A or u/s. 271B of the Act. [S. 44AB, 271A]

    Tribunal held, that since no format of books of account were prescribed under the Rules for civil contracts, penalty under S. 271A was not justified. When no penalty under S. 271A was leviable, penalty under S. 271B also could not be levied for non-audit as prescribed under S. 44AB of the Act. (AY. 2009-10 to 2014-15)

    Harshvardhan v. Dy. CIT (2020) 77 ITR 81 (SN)(Bang.)(Trib.)

  66. S. 271D: Penalty – Takes or accepts any loan or deposit – Money returned to father – Receipt of money from family members for medical emergency – Receipt of money from member of association for building school – Neither loan or advances – Levy of penalty is held to be not justified. [S. 269SS, 273B]

    Tribunal held that, money returned to father, receipt of money from family members for medical emergency and receipt of money from member of association for building school is neither loan or advances hence levy of penalty is held to be not justified. (AY. 2013-14)

    Gourang Chandra Nayak v. Jt. CIT (2020) 77 ITR 192 (Cuttack)(Trib.)

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