Research Team

1. S. 2(15) r.w.s. 11(4) : Charitable purpose – Exemption under s. 11 – Income from business or business held in trust – Assessee’s main object is for establishing, maintaining and running a hospital for philanthropic purposes and not for the purpose of profit

On appeal the High Court held that assessee-trust, carrying on business, was entitled to exemption in respect of income from the business of Chitty/Kurias such income was fully utilized for the purpose of ‘medical relief’, which is the main object of the assessee-trust, falling under the definition of ‘charitable purpose’.(IT Appeal No. 36of 2020, dt. 13-11-2020) (AY. 2012-13)

Bharathakshemam v. PCIT (2021) 320 CTR 198 / 199 DTR 113 (Ker.)(HC)

2. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Applicant, a Netherlands company, provides access to science database containing books/ journals / articles with a limited right of printing, making e-copies, and storing information to Indian subscribers – Consideration received not royalty but business income, as there is no transfer of any know-how or previous or new experience to subscriber [S. 90 – Double taxation relief – Article 7 & 12 – India-Netherlands DTAA, S. 195 – Deduction at source – Non-resident]

Applicant, a company based in Netherlands was engaged in business of providing electronic and print versions of books, journals, and online database solutions. It entered into two types of transactions, viz., (a) Pay per view transaction; and (b) Subscription agreements. An advance ruling was sought on whether receipt from Indian subscribers and customers for e-books / e-journals / e-articles is taxable as ‘royalty’ as per section 9(1) (vi) and Article 12 of India – Netherlands DTAA (‘DTAA’) or as ‘business income’ under section 28 of the Act and article 7 of the DTAA. The AAR held:

That the applicant merely compiles, collates various articles, journals and books on its web portal, which are accessible through publicly available search engines. This web based information is offered on a non-exclusive basis to the public. Content of the website remaining the property of the Applicant and protected by copyright and other intellectual property laws. There is neither there is any transfer of any know-how or previous or new experience to subscriber, nor does the subscriber get a copyright in books, journal or article, rather has a limited right of printing, making e-copies, and storing information for self-use. Therefore, receipt by Applicant from Indian subscribers and customers for e-books/e-journals/e-articles is not taxable as ‘Royalty’ as per article 12 of the DTAA but is in nature of business income. Thus, Indian subscribers are not required to withhold any tax on payment made to applicant under section 195 (AAR No. 1481 of 2013)

In Re: Elsevier BV, The Netherlands (2021) 432 ITR 251 (AAR)

3. S. 10(23C) : Educational institution – Exemption cannot be denied on ground that it does not have independent Memorandum of Association, Bye laws, etc.. [S. 10 (23)(vi)]

Dismissing the appeal of the revenue the Court held that so long as assessee adheres to parameters required to be satisfied under section 10(23C) to avail exemption, it is entitled to exemption and, therefore, unless findings of fact are given on basis of evidence that assessee does not meet parameters of section 10(23C), exemption claimed cannot be denied on ground that it does not have independent Memorandum of Association, Bye laws, etc. (AY. 2014-15)

CIT v. Sengunthar Matriculation Higher Secondary School (2021) 277 Taxman 252 (Mad.)(HC)

4. S. 10A : Free trade zone – Export turnover – Total turnover – Expenses incurred in foreign currency was to be excluded from both export turnover and total turnover for computation of deduction.

Dismissing the appeal of the revenue the Court held that, expenses incurred by in foreign currency was to be excluded from both export turnover and total turnover for computation of deduction. (AY. 2006-07)

PCIT v. Infosys BPO Ltd. (2021) 277 Taxman 320 (Karn)(HC)

5. S. 12A : Property held for charitable purposes – Registration – Trust or institution – Delay in filing Form 10B – There is no error or infirmity in the view taken by the CBDT or by the CIT for not condoning the delay of more than 365 days in filing Form No. 10B – Assessee advised to approach CBDT for special order to condone delay beyond 365 days (r.w.s 11)

On writ filed the High Court held that there was a delay in filing Form No. 10B beyond 365 days by the assessee-trust. Further, there was no error or infirmity in the view taken by the CBDT vide Circular No. 2 of 2020, dated January 3, 2020 or by the CIT while passing the impugned order fixing a period of one year’s delay i.e., 365 days for condonation of delay in filing Form No. 10B for AY 2018-19 and onwards cannot be said to be arbitrary or irrational. Having regard to the mandate of s. 119(2)(b), even at this stage, assessee may approach CBDT under the aforesaid provision seeking a special order to the CIT (Exemptions), to condone the delay in filing Form No. 10B for the asst. yr. 2018-19 which is beyond 365 days and thereafter to deal with the said claim on merit and in accordance with law. (Writ Petn No. 1061 of 2020 dt. 25-03-2020) (AY 2018-19)

Little Angels Education Society v. UoI & Ors* (2021) 320 CTR 331 / 200 DTR 289 (Bom)(HC)

*Also, C.F. Andrews Education Society (Regd) v. UoI & Ors

6. S. 12A: Registration – Trust – Benefit of exemption under section 11 should not be denied where registration certificate cannot be produced [S.11, 12A, 12AA and 143(3)]

The assessee did not have a copy of the registration certificate granted to it as the same was destroyed during floods of 1978. AO insisted on a copy of the registration certificate for granting benefit under section 11. A fresh certificate of registration was granted from AY 2017-18 onwards. However, department refused to grant exemption for AY 2013-14 to AY 2016-17 in absence of the registration certificate. The High Court held that the trust should not be denied the benefit of exemption under section 11 only on account of its disability to produce the necessary records which got destroyed during the floods. Further, the HC did not find anything suspicious with regard to the trust. HC directed assessee to produce entire records available with it to the department and directed the department to look into the same. (SCA No. 16039 of 2019 dt. 25-3-2021)(AY.: 2012-13)

Morbi Plot Jain Tapgachh Sangh v. CIT (2021) 433 ITR 1 / 110 CCH 217 (Guj.)(HC)

7. S. 12AA : Procedure for registration – Trust or institution-First application was pending – Second application was filed – Retrospective registration could not be granted based on the first application. [Rule, 17A, Form No 10A]

Assessee-trust filed application in Form 10A for grant of registration on 11-3-2009. Same remained pending; on 28-6-2011 assessee filed another application. Commissioner granted registration with effect from 1-4-2011. On appeal the Tribunal held that the assessee is deemed to have abandoned or waived their claim made in the first application dated 11-3-2009 owing to the fact that they made the second application dated 28-6-2011, which is a fresh application. On appeal the Court held that since assessee did not take any steps to dispose of first application from 2009 to 2011 and similar to first application, second application was also filed in Form 10A in accordance with rule 17A, second application was a fresh application and not merely a letter in continuation of first application and, thus, assessee would be deemed to have abandoned or waived off their claim made in first application . Accordingly Commissioner was justified in granting registration with effect from 1-4-2011 by taking into consideration second application and retrospective registration could not be granted in view of first application. (AY. 2012-13)

Carmel Educational and Charitable Trust v. ITO (2021) 277 Taxman 165 (Mad.)(HC)

8. S. 14A : Disallowance of expenditure – Exempt income – No expenditure was incurred directly or indirectly – No disallowance can be made.

Dismissing the appeal of the Revenue the Court held that , Tribunal on meticulous appreciation of evidence on record found that no expenditure was incurred by assessee directly or indirectly to earn exempt dividend income, no disallowance was to be made under section 14A. (AY. 2006-07)

PCIT v. Infosys BPO Ltd. (2021) 277 Taxman 320 (Karn)(HC)

9. S. 14A r.w.r. 8D: Sufficient interest free funds available – investment are presumed to be out of interest free funds –only those investments to be considered which yield exempt income for the purpose of calculation

The assessee made suo-moto disallowance under section 14A of the Act. However, the AO did not concur with the calculation of the assessee and made additional disallowance under Rule 8D(2)(ii) of the Act. The CIT(A) gave partial relief to the assessee.

On appeal before the Tribunal, it was held that when the assessee had sufficient owned (interest free) funds, it was to be presumed that the investments were made from such interest free funds. Hence, there was no scope to disallow interest under Rule 8D(2)(ii)of the Act. Reliance in this regard was placed on the decision of Hon’ble Bombay HC in the case of CIT v. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 which in turn followed the decision of Hon’ble Supreme Court in the case of East India Pharmaceutical Works Ltd. v. CIT (1997) 224 ITR 627.

Further, following the decision in the case of ACIT v. Vireet Investments (P) Ltd. (2017) 165 ITD 27 (Del) (SB) it was held that while computing the administrative expenditure disallowance under Rule 8D(2)(iii)only such investments were to be considered which yielded exempt income.

Nandi Steels Ltd vs. ACIT (2021) 320 CTR 432 / 201 DTR 37 (Kar)(HC)

10. S. 14 r.w.s.72 : Heads of income – Carry forward and set off of business losses against capital gains – Assessee was entitled to set off of carried forward business loss against capital gain arising on sale of business asset used for the purpose of business

On appeal held by High Court that proviso to s.72(1)(i) was omitted by Finance Act, 1999 w.e.f. 1st April, 2000. Therefore, for the A Yin question i.e., 2003-04, Assessee was not required to have carried on the business for the purposes of set off of brought forward business loss. Any income from business though classified under any other head can still be entitled to the benefit of set off. Assessee was therefore entitled to set off of carried forward business loss against capital gain arising on sale of business asset used for the purpose of business(ITA No. 103 of 2012, dt. 23-02-2021) (AY. 2003-04)

Nandi Steels Ltd v. ACIT (2021) 320 CTR 432 / 201 DTR 37 (Kar)(HC)

11. S. 14A : Disallowance of expenditure – Exempt income – Disallowance not to exceed exempt income.

Disallowance under section 14A cannot exceed the exempt income earned during the year. (A.Ys. 2008-09 and 2009-10)

Principal Commissioner Of Income Tax v. M/s. EWS Finance & Investments Pvt Ltd. (2021) 433 ITR 23 (Mad)

12. S. 28(iiic) : Business income – Customs Duty or Excise Refund on Capital Assets – Project not operational – Reduction in the Cost of Project – Refund is not taxable as income. [S.4, 145]

Dismissing the appeal of the revenue the revenue the Court held that as the project was not in operation during said year and it lodged a claim for refund of excise duty with Director General of Foreign Trade as deemed export benefits, since amount of excise duty related to cost of acquisition of capital assets/project, refund of excise duty would ultimately reduce cost of project and could not be treated as business income. (AY. 2011-12)

PCIT v. Maithon Power Ltd. (2021) 124 taxmann.com 204 (Delhi) (HC)

Editorial : SLP of revenue is dismissed, PCIT v. Maithon Power Ltd. (2021) 277 Taxman 406 (SC)

13. S. 28(iv) : Business income – Value of any benefit or perquisites – Converted in to money or not – One time settlement with bank – No reply was received from bank in response to notice issued under section 133(6) – Failure to produce books of account – Matter remanded to the Assessing Officer [S. 41(1), 133(6)]

Assessee owed a sum towards loan to bank. Subsequently, in one time settlement programme said loan was waived off by bank. Assessing Officer held that waived amount was income of assessee under section 28(iv). Assessing Officer assessed the waiver amount as income. Order of the Assessing Officer is affirmed by CIT (A) and Tribunal. On appeal the Court held that

Assessing Officer had also called for information from bank under section 133(6) in this regard, however, no reply was received. Therefore in absence of any particulars pertaining to previous years books of account, it was difficult to arrive at a decision and, therefore, in order to grant one more opportunity to assessee for production of books of account to substantiate its case, matter was to be remanded back to Assessing Officer. (AY. 2004-05)

Kothari International Trading Ltd. v. ACIT (2021) 277 Taxman 644 (Mad.)(HC)

14. S. 32 : Depreciation – Assets leased – Search and seizure – Depreciation allowed is up held [S.132]

Dismissing the appeal of the revenue the Court held that the assessee has discharged the onus to prove genuineness of transaction by furnishing necessary documents viz., copies of sanction letter, lease agreements, invoices, inspection records on various dates and inspection reports pertaining to pre-search and post-search period in support of its claim. Order of Tribunal is affirmed. (AY. 1997-98)

CIT v. Canara Bank (2021) 277 Taxman 440 (Karn)(HC)

15. S. 32 : Depreciation – Machinery – Put to use less than 180 days – Additional depreciation – Allowable in subsequent assessment year [S. 32(1)(iia)]

Dismissing the appeal of the revenue when plant and machinery acquired by assessee in second half of financial year 2007-08 was put to use for less than 180 days 10 per cent of additional depreciation under section 32(1)(iia) is allowable in that year, balance additional depreciation of 10 per cent could be allowed on these assets in relevant subsequent assessment year 2009-10 (AY. 2009-10)

CIT v. Aztec Auto (P.) Ltd. (2021) 277 Taxman 273 (Mad.)(HC)

16. S. 36(1)(vii) : Bad debt – TDS payment – Sales promoters – Order of Tribunal allowing the claim as bad debt is affirmed. [S.260A]

Dismissing the appeal of the revenue the Court held that the debt was written off as irrevocable in accounts of assessee. Accordingly the Tribunal was justified in allowing claim of assessee towards bad debt on account of TDS payments on behalf its promoters. (AY. 2003-04)

CIT v. Shaw Wallace Distilleries Ltd. (2021) 277 Taxman 145 (Karn)(HC)

17. S. 37(1) : Business expenditure – Postage, stationery, courier charges, etc., cost of which were to be recovered from various clients – Allowable as business expenditure.

The assessee incurred postage, stationery, courier charges, etc., in the course of winding up proceedings. The expenses were incurred as per SEBI directions; change of address was to be communicated to individual investors both by advertisement in prominent newspapers and also by individual communications. Due to closure of business in 2000, efforts were made to recover all expenses and fee payable before handing over records; however, it could not recover expenses incurred. Assessee claimed deduction of such expenditure. Assessing Officer disallowed the expense which was affirmed by the Tribunal. On appeal the Court held that since incurring of those expenditures was not doubted or disproved by revenue authorities in hands of assessee, such expenditure was required to be allowed by assessing authority. (AY. 2001-02)

Share Aids (P.) Ltd. v. ITO (2021) 277 Taxman 517/ 319 CTR 177 (Mad.)(HC)

18. S. 37(1) : Business expenditure – expenditure incurred for public issue of shares is capital in nature – cannot be allowed under section 37(1). [S. 37(1)]

Assessee engaged in the business of running health farms and resorts claimed a deduction of Rs. 1,89,84,676/- for public issue as revenue expenditure. AO held the same to be capital expenditure and disallowed the claim which was confirmed by the CIT(A) and Tribunal. The HC confirmed the order of the tribunal and held that the assessee had failed to show that its case warranted reconsideration. (TC Appeal No. 535 of 2019 dt. 5-2-2021)(AY.:1994-95)

Tatia Sky Line & Health Farms Ltd. v. ACIT (2021) 432 ITR 123 / 126 taxmann.com 75 (Mad.)(HC)

19. S. 37(1) : Business expenditure – Set-up of business – Allowability of advertisement expenditure.

Where the assessee had executed lease deeds for its premises, obtained Importer Exporter Code, engaged senior employees and carried out local purchase and sale, it was to be held that its business had been set-up and expenditure incurred by it could not be disallowed as being pre-operative in nature. Further, expenditure incurred on advertisement, if incurred wholly and exclusively for the purposes of business will be allowable as long as no capital asset is created and the extent of the advertisement expenditure is irrelevant. (A.Y. 2010-11)

Principal Commissioner Of Income Tax v. Miele India Pvt. Ltd. (2021) 433 ITR 0286 (Delhi)

20. S. 41 (2) : Profits chargeable to tax – Business loss – Balancing charge – Block of assets – Winding up – Sale value less than written down value – Allowable as business loss [S.(2(11), 28 to 44DB, 50]

The assessee in the process of winding up sold some of its depreciable assets and suffered losses thereon as same were sold below written down value of those assets in books of account. The assessee claimed the said loss as business loss. Assessing Officer rejected assessee’s claim. On appeal the Tribunal held that section 41(2) is applicable only where sale value along with scrap value exceeds written down value and since in instant case, sale value realized was less than written down value, section 41(2) would not apply. On appeal the High Court held that even if sections 28 to 44DB talk only of taxability on excess received by assessee over written down value of assets, it cannot exclude or ignore minus figure or loss occurring on such sale transactions. Since certain assets of block of assets, not being immovable property of assessee, were sold during regular course of business, before it was wound up during relevant previous year, loss occurring on such sale at a figure less than written down value of assets should be treated as Business Loss under section 41(2) of the Act. (AY.2001-02)

Share Aids (P.) Ltd. v. ITO (2021) 277 Taxman 517/ 319 CTR 177 (Mad.)(HC)

21. S. 43(1) : Actual cost – Financial assistance for rehabilitation of tsunami damaged roads and bridges, ports and harbours – Interest free loan – Not to be reduced from actual cost. [S.32 43(1), Explanation 10]

Dismissing the appeal of the revenue the Court held that since Government Order clearly mentioned that what was sanctioned to assessee was a loan and not in nature of grant, Tribunal was right in granting relief to assessee by treating receipt in question viz. grants-received from Government, as interest free loans and allowing depreciation claimed against assets acquired from said receipts. (AY. 2014-15, 2015-16)

CIT v. Tamilnadu Martime Board (2021) 277 Taxman 15 (Mad.)(HC)

22. S. 54 : Capital gains – Profit on sale of property used for residence – Amount spent on construction – Mere non-compliance of a procedural requirement, exemption should not be denied – Order of single judge is affirmed by division Bench [S.45, 54(2)]

Assessee claimed certain sum spent on construction cost as deduction under section 54 of the Act. The Assessing Officer restricted exemption claimed under section 54 proportionately to amount deposited in Capital Gain Account Scheme as required under section 54(2). Assessee filed writ petition against order of revenue and same was allowed by Single Judge, holding that mere non-compliance of a procedural requirement under section 54(2) itself could not stand in way of assessee in getting benefit under section 54, if he was, otherwise, in a position to satisfy that mandatory requirement under section 54(1) was fully complied with within time limit infructuous. (AY. 2014-15)

CIT v. Venkata Dilip Kumar (2021) 277 Taxman 463/ 201 DTR 9 (Mad.)(HC)

23. S. 54EC : Capital gains – Investment in bonds – Amendment Restricting the investment to 50 lakhs is prospective in nature [S.45]

Dismissing the appeal of the revenue the Court held that amendment to section 54EC brought with effect from 01-04-2015 restricting investment in assets from sale consideration on sale of original asset to Rs.50 lakhs is prospective in nature, therefore prior to assessment year 2015-16, it was possible for assessee to claim deduction of Rs.1 crore by investing Rs.50 lakhs in each of financial years but within six months from date of transfer.

Circular No. 3/2008 (AY. 2009-10)

CIT v. Neena Krishna Menon (Smt.)(2021) 277 Taxman 211 (Karn)(HC)

24. S. 56 : Income from other sources – AO cannot question the valuation for the purposes of section 56(2)(viib).

Where shares were issued to unrelated investors by following DCF method which is prescribed under Rule 11UA, the AO could not doubt such valuation only on the basis that the projections did not match the actual results. The fact that shares were issued to unrelated investors also points towards the fact that the valuation was genuine. (A.Y. 2015-16)

Principal Commissioner Of Income Tax v. Cinestaan Entertainment Pvt. Ltd. (2021) 199 DTR 345 (Del), (2021) 320 CTR 381 (Del), (2021) 433 ITR 82 (Delhi)

25. S. 57 : Income from other sources – Deductions – Interest paid on loans from relatives – Matter remanded. [S.57 (iii)]

Assessee claimed the deduction of interest paid to relatives. Assessing Officer disallowed the interest which was affirmed by the Tribunal. On appeal the Court held that the assessee had given names of persons from whom he borrowed money and the interest paid was allowed as deduction from year to year and lenders were disclosed the interest in their return of income. High court remanded the matter to the file of Assessing Officer to allow the interest as per the law. (AY. 2011-12)

Rajendra Kumar Jain v. ITO (2021) 277 Taxman 236 (Mad.)(HC)

26. S. 68 : Cash credits – Long term capital gains from equities – Penny stock – Tribunal – Duties – Tribunal was not justified in remanding the matter to the Assessing Officer – Order of CIT (A) confirming the addition was affirmed – Order of Tribunal set aside [S. 10(38), 45, 254 (1)]

Assessing Officer after verification found that transaction of purchase of shares by assessee was a sham transaction and that assessee could not discharge onus cast upon her to prove genuineness of transaction by producing documentary evidence and accordingly refused to entertain claim made by assessee under section 10(38) towards sale proceeds and made addition u/s 68 of the Act. On appeal CIT (A) affirmed the order of the Assessing Officer. On appeal the Tribunal without finding an error in approach of Assessing Officer or Commissioner (Appeals) remanded the matter Assessing Officer for a fresh consideration of On appeal by the Revenue the Court held that Tribunal was required to record reasons as to why matter should be remanded and as to why Tribunal could not decide factual issue on available material .Accordingly the Court held that the assessee had not discharged the onus cast upon him to prove the genuineness of the transactions. The assessee had entered into engineered transaction to generate artificial long term capital gains and the Explanation offered by the assessee regarding the credit of Rs. 15,86,250/- in its book was found to be unsatisfactory and therefore, the Assessing Officer held the same as unexplained cash credit which was added to the total income of the assessee as per the provisions of section 68 of the Act and assessed under the head Income from other sources. Order of Tribunal set aside and order of CIT (A) is restored. (AY. 2012-13)

CIT v. Manish D. Jain (HUF) (Mrs.) (2021) 277 Taxman 604 (Mad.)(HC)

27. S. 68 : Cash credits – Purchase of scrap – Recalling the order is held to be justified – Deletion of addition is held to be justified [S.133(6), 254 (2)]

Assessee purchased scraps from two sundry creditors/sellers. Notice issued u/s 133 (6) of the Act to the sellers was returned UN served. The Assessing Officer treated the purchases as cash credits. The Tribunal up held the addition. On miscellaneous application considering the TIN number, PAN number, invoices, etc. to prove their identity and genuineness of transaction which was lost sight in the original order was lost sight hence passed the rectification order allowing the appeal. On appeal by the revenue the Court held there was a justifiable cause for rectification of its earlier order by deleting additions under section 68 of the Act. (AY. 2007-08)

CIT v. Shree Ganesh Ventures (2021) 277 Taxman 416 (Mad.)(HC)

28. S. 68 : Cash credits – Primary onus on the assessee.

The primary onus to demonstrate the nature and source of the credit is on the assessee. Only when such onus is discharged by the assessee, does it shift to the department. Where the assessee only filed a list of investors, which did not even contain their PAN numbers, it could not be said that the assessee had discharged its onus. (A.Y. 2006-07)

Principal Commissioner Of Income Tax v. M/S. SRM Systems And Software P. Ltd. (2021) 433 ITR 111 (Mad)

29. S. 68 : Cash credits – Bogus purchases – Trading in ferrous and non-ferrous metal – Stock register produced – Deletion of addition is held to be justified – No question of law [S.260A]

Assessee was engaged in business of trading in ferrous and non-ferrous metal. The Assessing held that Rs.66.76 lakhs as non-genuine. CIT (A) deleted the as submitting its stock register showing month wise purchases and sales and also by submitting confirmations from parties to whom sales had been made along with their VAT registration. Order of CIT (A) was affirmed by the Tribunal. Appeal of the revenue was dismissed by the High Court. (AY. 2011-12)

PCIT v. Sandeep P. Shah (2021) 124 taxmann.com 206 (Guj) (HC)

Editorial: SLP of revenue is dismissed, PCIT v. Sandeep P. Shah (2021) 277 Taxman 395 (SC)

30. S. 69A : Unexplained Money – Burden of proof – Cash found in assessee’s possession – Burden on assessee to prove that he was not owner of cash – No Satisfactory Explanation – Addition To Income Justified

During a raid by the CBI and Revenue authorities, the assessee was found to be the owner of the money. A statement on oath of the assessee was recorded under section 132(4) of the Act, wherein it was contended that the amount of Rs. 2 crores was received as advance for sale of agricultural land at Faridabad. Total area of the land was stated to be 50 acres and the agreed price for the sale was disclosed as Rs. 6 crores. He further stated that the amount was received from one Mr. Sharma and receipt against the advance of Rs. 2 crores was issued by the assessee, although at the time of the search, the assessee did not possess a copy of the same. During the assessment proceedings, the assessee submitted that he had received the cash amounting to Rs. 2 crores as advance from one Mr. Ahuja through the broker Mr. Sharma. Independent enquiries were conducted by the AO, notice under section 133(6) was issued to Mr. Ahuja, and documents were obtained from him, which included a copy of a memorandum of understanding dated April 12, 2010 purported to be executed between him and the assessee for purchase of the said agricultural land. Mr. Ahuja submitted that the payment of Rs. 2.01 crores was made to the assessee in cash, which was withdrawn from the bank account maintained by him. Later, the authorised representative of Mr. Ahuja orally stated that the latter had filed a suit for recovery of the advance of Rs. 2.01 crores against the assessee. In order to carry out further enquiry and verification in relation to the source of the cash found and seized, the AO recorded the statements of Mr. Ahuja and Mr. Sharma, pursuant to summons issued under section 130. Ultimately, the AO, after consideration of the testimonies and other evidence furnished, framed the assessment and added the amount of Rs. 2 crores to the income of the assessee. The CIT(A) and Income Tax Appellate Tribunal confirmed the addition of Rs. 2 crores.

On appeal, the High Court held that for an addition under section 69A, possession is evidence of ownership, and the presumption of ownership is the strongest in the case of cash, because its title can be transferred by mere delivery of possession, and thus, the onus is on the assessee to prove that he is not the owner of the currency in his possession. In the present case, the onus lay on the assessee to explain the “nature and source” of this amount. The explanation offered by the assessee had not been found to be satisfactory by the tax authorities in light of the discrepancies and anomalies in the statements of the assessee. These were purely findings of fact which had been concurrently accepted by the Commissioner (Appeals) as well as the Tribunal. The observations of the tax authorities were on independent examination of the case and not entirely resting on the case which had been set up by the CBI. As far as the Income-tax proceedings were concerned, since the explanation offered by the assessee had not been found to be satisfactory, the addition was in accordance with law. (ITA No. 16 of 2021) (AY 2011-12)

Jatinder Pal Singh v. DCIT (2021) 432 ITR 293 (Delhi)

31. S. 69C : Unexplained expenditure – Seized material – Department not provided the details of transaction – Deletion of addition is held to be justified – No question of law [S.132, 260A]

Department filed an appeal against the order of the Tribunal wherein the Tribunal deleted the addition of Rs. 739.04 lacs stating that payment by the assessee of the amount of Rs. 739.04 lacs had not been established from the seized material and therefore no addition could be made on this account ignoring the fact that the assessee never provided the details of the transaction either during the course of assessment proceedings or thereafter and the assessee was in the exclusive knowledge. High Court dismissed the appeal being question of fact.

PCIT v. Hassan Ali Khan (2021) 124 taxmann.com 208 (Bom) (HC)

Editorial: SLP of revenue is dismissed PCIT v. Hassan Ali Khan, (2021) 277 Taxman 398 (SC)

32. S. 70 : Set off of loss – Loss from eligible unit could be set off against profit of non-eligible unit – Income under the same head. Dismissing the appeal of the revenue the Court held that loss sustained by assessee company from its unit which was eligible for exemption under section 10A could be set-off against profit of its other unit which was not eligible for exemption under said section under same head of income. (AY. 2006-07)

PCIT v. Infosys BPO Ltd. (2021) 277 Taxman 320 (Karn)(HC)

33. S. 72 : Carry forward and set off of business losses – The head of income is not relevant while carrying forward and setting off business loss.

The assessee declared income in its return after setting off the brought forward business loss against income arising from the sale of undertaking which was offered to tax under the head capital gains. The CIT sought to revise the assessment under section 263 for the reason that brought forward business loss could not be set off against capital gains. The Tribunal allowed the set off to the extent of depreciation which had been claimed by the assessee in the preceding years on the undertaking on the ground that the sale consideration to that extent represented recoupment of depreciation which is in the nature of business income, though offered under the head capital gains. Held that the view of the Tribunal is correct in view of the judgements of the Supreme Court in the case of CIT v. Chugandas and Co. (1965) (55 ITR 17) (SC) and CIT v. Cocanada Radhaswami Bank Ltd. (1965) (57 ITR 306) (SC). (A.Y. 2011-12)

Principal Commissioner Of Income Tax v. M/s. Alcon Developers (2021) 432 ITR 277 (Bom)

34. S. 72 : Carry forward and set off of business losses – Export Oriented undertakings – Declaration in terms of section 10B(8) was to be treated as directory as provision of this section does not provide for any consequence by non-filing of declaration by time limit – Carry forward and set off of business losses was allowed. [S.10B(8)]

Assessee, a software company, filed its original return on due date in which exemption under section 10B was claimed. Thereafter, assessee withdrew said exemption before completion of assessment and filed revised return in which said exemption was not claimed and certain loss was declared. Assessing officer denied assessee’s claim of carrying forward of losses under section 72, however same was allowed by Tribunal. On appeal by revenue the Court held submission of declaration in terms of section 10B (8) was to be treated as directory as provision of this section does not provide for any consequence by non-filing of declaration by time limit. Since assessee had filed said declaration before completion of assessment, appeal filed by revenue was to be dismissed. Referred Sambhaji v. Gangabai [2008] 17 SCC 117, Rajendra Prasad Gupta v. Prakash Chandra Mishra [2011] 2 SCC 705 and Ramji Gupta v. Gopi Krishan Agrawal (D) AIR 2013 SC 3099. In State of Bihar v. Bihar Rajya Bhoomi Vikas Bank Samiti [2018] 9 SCC 472, it has been held that if infraction of procedural provision does not provide for any consequences, such a provision has to be construed as directory. In the instant case, section 10B of the Act does not provide for non-compliance of submission of declaration. (AY. 2001-02)

PCIT v. Wipro Ltd. (2021) 277 Taxman 309/ 318 CTR 340/ 197 DTR 349 (Karn)(HC)

35. S. 80P : Co-operative societies – Exemption under section 80P cannot be denied – issue covered by decision of SC in Mavilayi Service Co-operative Bank [S.80P]

Assessee a co-operative society engaged in the business of banking by providing credit facilities only to its members claimed exemption from income tax under section 80P(2)(a)(i). The AO denied the exemption under section 80P. The HC relied on the decision of Mavilayi Service Co-operative Bank Ltd (431 ITR 1)(SC) and held that the issue is no more res integra and allowed the exemption to the assessee. (ITA No. 136 of 2016 dt. 18-2-2021)(AY.:2010-11)

M/s Tellicherry Public Servants Co-operative Bank Ltd. (Rep. by its Secretary Shri Anandaprasad. M) v. CIT (2021) 433 ITR 60 / 110 CCH 210 (Ker.)(HC)

36. S. 92C : Transfer pricing – Arm’s length price – Exclusion of ten comparable – Finding of fact – No substantial question of law [S.260A]

Dismissing the appeal of the revenue the Court held that order of Tribunal upholding exclusion of ten comparable for purpose of determination of arm’s length price of international transactions involving is question of fact and does not involve any substantial question of law. (AY. 2008-09)

PCIT v. Evaluserve.Com (P) Ltd. (2021) 124 taxmann.com 210 (Delhi) (HC)

Editorial: SLP of revenue is dismissed , as there was delay of 359 days in filing said petition and explanation offered in support of prayer for condonation was not satisfactory , PCIT v. Evaluserve.Com (P) Ltd. (2021) 277 Taxman 392 (SC)

37. S. 92C: Transfer pricing – Arms’ length price – Writ – Alternative remedy – Remedies are available in the system and the Assessee ought to have approached the Tribunal before approaching this Court – But instead challenged the TPO’s order in this Court –Assessee is advised to approach the Tribunal.

Held by the High Court that It is not clear whether the assessee approached the DRP with objections against the draft assessment order. Further, Assessee ought to have approached the Tribunal against the final order of assessment. In such circumstances, remedies are available in the system and the assessee ought to have approached the Tribunal before approaching this Court, but instead challenged the TPO’s order in this Court. Even in the first instance the Assessee did the same thing by approaching the Tribunal against the final assessment made. As done by it earlier, certainly, all the issues can be agitated before the Tribunal. Therefore, this writ appeal is disposed of with liberty to the Assessee to approach the Tribunal within four weeks from the date of receipt of a copy of this order. (Writ Appeal No. 2104 of 2018 dt. 16-09-2020) (AY. 2008-09)

Hyundai Motor India Ltd v. DCIT (2021) 320 CTR 106 / 199 DTR 124 / 432 ITR 306 / 276 Taxman 156 (Mad)(HC)

38. S. 92CA : Reference to transfer pricing officer to verify details which AO was not competent to check – such reference is valid in-spite of being a case of limited scrutiny. [S. 92CA and 92D]

Assessee’s case was picked up for limited scrutiny for the purpose of verifying value of international transaction shown as per Form 3CEB and return of income. Assessee challenged the reference to the TPO as well as the draft order passed under section 144C. The HC held that since the AO was not competent to check the aforesaid facts and provide proper reasons for such reference. Hence, the reference made to the TPO was justified and upheld. (WA No. 1133 and 1134 of 2020 dt. 17-02-2021) (AY.:2016-17)

Transsys Solutions (P.) Ltd v. ACIT (2021) 432 ITR 375 / 126 taxmann.com 164 (Mad.)(HC)

39. S. 92CA(3) : Reference to transfer pricing officer – order passed by TPO on 1-10-2019 for AY 2016-17 barred by limitation by one day [S. 92CA(3), 92CA(3A) and 153]

Assessee filed its return for AY 2016-17 and TPO passed an order on 1-11-2019. The assessee filed a writ petition challenging the TPO order passed under section 92CA(3) being barred by limitation by one day. Limitation under section 153 expired on 31-12-2019 and period of 60 days prior to the last date on which period of limitation referred to in section 153 for making assessment expires is 1-11-2019 and hence ‘any date prior thereto’ would mean 31-10-2019 or before and thus the impugned order are held to be barred by limitation. (WP Nos. 32669, 33751, 34174, 34389, 34568 & 32703 of 2019 dt. 07-09-2020) (AY.:2016-17)

Pfizer Healthcare India (P.) Ltd. v. JCIT (2021) 433 ITR 28 / 124 taxmann.com 536 (Mad.)(HC)

40. S. 92CA r.w.s 143(3) & 144C : Reference to transfer pricing officer – Draft assessment order – Once the case was remitted back to the first respondents (AO) by Tribunal, it was incumbent on the part of the AO to have passed a draft assessment order – It was not open for the AO to bypass the statutory safeguards prescribed under the Act and thereby deny the right of the assessee to approach the DRP –Impugned order is quashed and case is remitted back to the AO to pass a draft assessment order.

Held by the court that once the case was remitted back to the respondents by Tribunal, it was incumbent on the part of the first respondent (Assessing Officer) to have passed a draft assessment order under S.143(3) r.w.s. S.92CA(4) and S.144C(1). Impugned order is quashed and case is remitted back to the first respondent to pass a draft assessment order.(Writ Petn. No. 32751 of 2017 and Writ Misc. Petn. No. 36089 of 2017, dt. 27-05-2021) (AY 2009-10)

Durr India (P) Ltd. v. ACIT(2021) 433 ITR 48 (Madras) (HC)

41. S. 115WB : Fringe benefits – Assessee paid FBT in respect of contribution towards superannuation fund – Tribunal held that assessee was not liable to pay such FBT – Application filed for refund of FBT paid – Rejection by Principal Commissioner of claim for refund in view of circular issued by CBDT – Assessee permitted to file application before Board – Limitation – Not to be barred by limitation since section 119 does not have limitation

Assessee, a banking company, filed its FBT return declaring fringe benefit value of certain amount. It contended that value of statutory contribution made to superannuation fund could not be considered as a perquisite and, therefore, could not be regarded as fringe benefit. Same was denied by the AO. Accordingly, assessee paid FBT in respect of contribution towards superannuation fund. On an appeal, the Tribunal held that statutory contribution made to superannuation fund was outside ambit of FBT and accordingly, assessee filed an application under section 264 for refund of amount of such FBT paid by it. The PCIT rejected the same on grounds of being barred by limitation. On a writ petition filed by the assessee the court remitted the matter to the Principal Commissioner to pass orders afresh under section 119. But once again the assessee’s request for refund was rejected. On a writ petition :

Held, that the contention of the Department that Circular No. 9 of 2015, dated June 9, 2015 which stated that a claim for refund would not be entertained beyond six years from the end of the assessment year for which the claim was made was binding on the Principal Commissioner, and that the claim could have been considered only by the Board and not by the Principal Commissioner were sustainable. However, the Principal Commissioner had not taken note of the spirit of the court’s order dated June 12, 2019, wherein it had stated that if the assessee was not liable to pay any fringe benefits tax, then, the Department ought to have refunded it. The Income-tax Department being an arm of the State was bound by the constitutional mandate enshrined in article 14 of the Constitution of India and the principles of fairness and reasonableness. Though any taxing statute would have to be construed strictly and there was no scope for applying equitable principles, the assessee’s case was not one of tax liability. According to the legal position prevailing, the assessee was not liable to have made any payment of fringe benefits tax in respect of contribution towards superannuation fund. Circular No. 9 of 2015, dated June 9, 2015 issued by the Board was no doubt binding on the authorities including the Principal Commissioner, but a court was not bound by such a circular. Section 119 did not have any limitation. The assessee was permitted to file an appropriate application before the Central Board of Direct Taxes. Since as on date there was no tax liability on the part of the assessee the application would be entertained by the Board without reference to limitation and orders passed. If any refund was ordered in the pending appeal by the Department the question of paying any interest by the Department would not arise. (W. P. (MD) No. 20806 of 2019)

Karur Vysya Bank Limited v. PCIT [2021] 432 ITR 622 (Mad)

42. S. 119 : Central Board of Direct Taxes – Instructions – Delay to be condoned in cases of genuine hardship.

Where the CBDT rejected the Petitioner’s application for condonation of delay in filing of return of income for the A.Y. 2018-19 and the single judge remanded the matter for reconsideration after recording that delay should be condoned in cases of genuine hardship, the division bench of the High Court held that such judgement was in accordance with law. (A.Y. 2018-19)

Principal Commissioner Of Income Tax And Ors. v. M/s. Navanidhi Vividhoddesha Sahakara Sangha Ltd. (2021) 433 ITR 177 (Karn)

43. S. 132 : Search and seizure – Warrant of authorization – Search and seizure action is held to be valid though the petitioner resigned from said company four years ago – Writ petition was dismissed [Art. 226]

Petitioner filed writ petition challenging warrant of authorization and consequential action of conduct of search and seizure operation to be illegal, unauthorised and ultra vires provisions of section 132 of the Act on the ground that the petitioner having resigned from said company four years ago he had nothing to do with it. Dismissing the petition the Court held that writ court cannot go into sufficiency and adequacy of reasons recorded in note of satisfaction in terms of section 132 and power of High Court is limited only to assessing whether relevant reasons were recorded while initiating proceedings. Since satisfaction note was clearly concerned with tax evasion activities conducted by various companies and persons mentioned therein and same had been relied upon by authority to initiate proceedings under section 132, search and seizure operations carried out in terms of section 132(1) could not be said to be illegal and ultra vires statute .

Ajay Kumar Singh v. DGI Bihar (2021) 434 ITR 352 / 277 Taxman 633 (Patna)(HC)

44. S. 132 : Search and Seizure – Writ – Cash seized from assessee – Application for release of cash under investigation – Writ could not be issued to direct release of cash [Article 226 of Constitution of India]

Held, that the assessee claimed that it was a registered public charitable trust, running educational institutions and was exempted from payment of tax under section 12AA of the Income-tax Act, 1961. It was the case of the assessee that on 12th March, 2019, when its managing trustee was proceeding to his bank to deposit a sum of Rs. 68,14,000 belonging to its school, he was intercepted by the Flying Squad which took custody of the cash of Rs. 68,14,000 and issued a receipt. The assessee applied for release of the cash. It could be seen from the counter affidavit and also from the submissions made by the assessee, that the Respondents had not admitted that they were liable to release the seized cash back to the assessee. It was their case that the request of the assessee for releasing of the cash was under investigation. In such view of the matter, the court could not issue a positive direction for release of the cash to the assessee.

Leo Charitable Trust, (Rep. by its Managing Director, Antony Xavier) v. PDIT (Inv) and Ors. (2021) 432 ITR 286 (Mad)

45. S. 132B : Search and seizure –Authorisation under s. 132(1) – Seizure of cash by Police vis-a-vis validity of search warrant – Intimation by the Police to the tax dept would not confer jurisdiction on the tax dept to detain and withhold cash – that too by issuance of an invalid search warrant having no place of search mentioned – No basis for the tax dept to invoke the provisions of ss. 132, 132A and 132B since there is no ‘reason to believe’ that the petitioner has violated any provision of law–Dept directed to refund the cash along with interest [r.w.s. 132(1) & 131(1A)]

Held by the High Court that the cash from petitioner’s employee was seized by police and handed over to the income-tax department on August 27, 2019 and therefore search warrant dt. August 28, 2019, that too not mentioning the place to be searched, was a fabricated document. Further, intimation by the Police to the income-tax department on August 27, 2019 would not confer jurisdiction on the income-tax department to detain and withhold cash, that too by issuance of an invalid search warrant under S. 132. Income-tax department is directed to refund the cash to the Assessee along with interest. (W.P. No. 23023 of 2019, dated
28-12-2020).

Mectec v. DIT* (Inv)(2021) 319 CTR 95 / 198 DTR 157 /433 ITR 203 / 278 Taxman 214 (Telegana) (HC)

*Also Vipul Kumar Patel v. Union of India (W.P. No. 29297 of 2019)

46. S. 132(4) : Search and seizure – Statement on oath – Addition only the basis of a statement not sustainable. [Section 69A]

Addition which is made solely on the basis of a statement recorded under section 132(4) of the Act cannot be sustained if it is not corroborated by any other evidence.

Principal Commissioner Of Income Tax v. M/s. Kunvarji Commodities Brokers Pvt. Ltd. (2020) 193 DTR 0018 (Guj), (2021) 318 CTR 0597 (Guj), (2021) 432 ITR 0180 (Guj), (2020) 274 Taxman 162 (Gujarat)

47. S. 143(3) : Assessment – Joint venture – Association of persons – Once amount had been offered to tax by its members, AOP could not be saddled with liability to pay tax in respect of same amount – Estimation of net profit at 11.59 % was deleted – Order of Tribunal is affirmed [S. 4, 2(31) (v)]

Assessee was a joint venture constituted through a joint venture agreement, holding a separate permanent account number and having status of AOP. Assessing Officer finalised assessment under section 143(3) treating assessee as an AOP and making addition by adopting net profit ratio at 11.59 per cent of gross receipt. Commissioner (Appeals) deleted addition made by Assessing Officer. Tribunal affirmed the order of CIT (A) and held that AOP was formed only to secure work and after that there was no involvement of such AOP in execution of work as entire work was executed by members of joint venture as agreed between them. Tribunal also held members of joint venture had duly shown income in their returns of income and paid tax thereon. Joint venture and members of joint venture were being taxed at maximum marginal rate, and hence, no loss had been caused to revenue. Tribunal also held that requirements of CBDT circular No. 7/2016 were duly satisfied in case of assessee and hence, once amount had been offered to tax by its members, hence AOP could not be saddled with liability to pay tax in respect of same amount. High Court affirmed the order of the Tribunal. (AY. 2008-09, 2009-10)

PCIT v. Backbone Projects Ltd. (2021) 124 Taxmann.com 261 (Guj) (HC)

Editorial: SLP of revenue is dismissed, PCIT v. Backbone Projects Ltd. (2021) 277 Taxman 497 (SC)

48. S. 143(3) : Assessment – Business of textile – Cash sales – Income from undisclosed sources – Income from other sources – Sale of opening stock cannot be treated as income from undisclosed sources. [S.56, 68, 133A]

Assessee was engaged in business of textiles. All sales were cash based on the survey report the Assessing Officer held that entire cash deposit found in assessee’s bank account was unexplained income and not sale proceeds. On appeal the Tribunal deleted the addition. On appeal by the revenue the Court held that where quantum figure and opening stock was accepted in previous years during scrutiny assessments, receipt from sales made by assessee proprietary concern out of its opening stock could not be treated as unexplained income to be taxed as income from other sources. (AY. 2014-15)

PCIT v. Akshit Kumar (2021) 277 Taxman 423/ 197 DTR 121/ 318 CTR 26 (Delhi)(HC)

49. S. 147 : Reassessment – After the expiry of four years – When re-assessment proceedings to disallow brought forward loss were held to be without jurisdiction, High Court could not issue fresh directions to Assessing Officer to look into other grounds.[S.72, Art 226]

Reassessment proceedings were challenged before the High Court. High Court held that the Assessing Officer was not entitled to adjust loss of brought forward from books of account of transferor-company. However the Single Judge held that re-assessment was without jurisdiction but rendered direction to Assessing Officer to look into other grounds. On appeal the division bench held that when the since Single Judge came to conclusion that re-assessment proceedings were without jurisdiction, Single Judge was barred to issue any further directions to Assessing Officer to look into other grounds. (AY. 2010-11)

T. Stanes and Company Ltd. v. Dy. CIT (2021) 277 Taxman 230 (Mad.)(HC)

50. S. 147 : Reassessment – Business expenditure – Loss on bidding deduction – Tribunal quashed the reassessment on the ground that there was no failure on the part of assessee to disclose all material facts – High court quashed the order of Tribunal and remanded the matter back to Tribunal to decide on merit afresh. [S.37 (1)), 148]

Allowing the appeal of the revenue the Court held that since Tribunal had not taken note of fact that Assessing Officer had recorded reasons and had held that escapement of income from assessment had taken place due to failure to disclose fully and truly all material facts necessary on part of assessee, impugned order of Tribunal was to be quashed and matter was to be remitted back to Tribunal to decide same afresh. (AY. 2003-04)

CIT v. Shriram Chits (Karnataka) (P.) Ltd. (2021) 277 Taxman 224 (Karn)(HC)

51. S. 147 : Reassessment – Unexplained money – Enforcement Directorate without making any independent inquiry himself into matter – Borrowed satisfaction – Reassessment was held to be not valid [S.69A)

Assessing Officer reopened the assessment on the ground that assessee had paid bribe to Iraqi officials and added the amount as undisclosed investment. On appeal the Tribunal held that the Assessing Officer had simply borrowed conclusions drawn by Enforcement Directorate without making any independent inquiry himself into matter. On appeal the High Court held that these were re-assessment proceedings and not at the stage where it was enough to form a prima facie view for re-opening the assessment. In the re-assessment proceedings the AO was expected to undertake a full-fledged inquiry into the documents produced before him to come to the conclusion that the addition sought to be made was justified. As pointed out by the ITAT or that the AO seems to have done is to simply borrow the conclusions drawn by the ED without making any independent inquiry himself into the matter. Even before the ITAT, the Revenue was unable to show the precise documents or material on the basis of which the AO formed the reason to believe that 60,000 US$ had been paid as bribe to the Iraqi officials and therefore was required to be added to the income of the Assessee. Order of Tribunal was affirmed. (AY. 2001-02)

PCIT v. Andaleeb Sehgal (2021) 124 taxmann.com 246 (Delhi) (HC).

Editorial: SLP of revenue is dismissed, PCIT v. Andaleeb Sehgal (2021) 277 Taxman 492 (SC)

52. S. 148 : Reassessment – Reasons recorded not communicated – Reassessment is held to be bad in law [S. 147, 292BB]

Assessing Officer reopened assessment on ground that in original assessment, he had extended excessive and unnecessary relief to assessee on wrong appreciation of facts, though the recorded reasons were not communicated to the assessee. CIT (A) up held the order of the Assessing Officer. On appeal the Tribunal quashed reassessment proceedings on ground that reasons for reopening were not communicated to assessee and despite opportunities, revenue was not able to produce any evidence to show that reasons recorded for reopening had been provided to assessee as requested by them in their letter. On appeal by revenue the High Court held that Tribunal was right in quashing reassessment proceedings. (AY. 2006-07)

CIT v. Janak Shantilal Mehta (2021) 277 Taxman 385 / 200 DTR 385 (Mad.)(HC)

53. S. 148 : Reassessment – Transfer pricing – Objection not disposed of against reassessment notice – Single judge directed the Assessee to participate in adjudicating mechanism- Order of single judge is affirmed in appeal. [S.92C, 92D, 92E, 148, Art. 226]

Assessing Officer without dealing with objections raised against reopening of assessment transferred its case to Transfer Pricing Officer (TPO) under section 92CA who further called upon assessee to furnish information in terms of sections 92D and 92E. The Assessee filed writ petition against reference of its case by Assessing officer to TPO without dealing with its objections against reopening. Single Bench directed assessee to participate in statutory adjudication mechanism and dismissed writ petition. Assessee filed an writ appeal challenging said order of Single Judge. Dismissing the appeal the Court held that .finding rendered passed by Single Judge was an appropriate procedure to be adopted and same was to be upheld.

PPN Power Generating Company (P) Ltd v. CIT (2021) 277 Taxman 240/ 200 DTR 382/ 320 CTR 268 (Mad)(HC)

54. S. 148 : Reassessment – Notice – AO bound to dispose off objections before referring the matter to the TPO – However, assessee to comply with notices issued under section 92D and 92E [S. 92D r.w.s 92E and 147]

Assessee challenged the notice issued under section 148 of the Act and sought reasons and filed objections for reopening the assessment. The HC held that the AO is bound to dispose off objections before referring the case under section 92CA to the TPO following the decision of GKN Driveshaft (SC). However, the HC directed the assessee to participate in the statutory adjudication mechanism and provide information which was called for under section 92D and 92E of the Act. Petition of the assessee disposed off. (WA No. 855 of 2020 dt. 28-09-2020) (AY.:NA)

PPN Power Generating Company (P.) Ltd. v. CIT (2020) 320 CTR 268 / 200 DTR 382 / 122 taxmann.com 42 (Mad.)(HC)

55. S. 148 : Reassessment – Notice – Validity – After the expiry of four years – Survey conducted – Back up of computer, laptop, mobiles, hard disk and gadgets impounded – Assessee maintained an undisclosed bank account which had credit balance of huge amount – Report of investigation wing that assessee’s income had escaped assessment – Mere disclosure of bank transaction in return not sufficient – Notice issued after considering facts – Valid [S. 69A]

The assessee had filed his return of income declaring total income of certain amount and same was processed under section 143(1). A survey under section 133 was conducted in the case of one AIPL during which back up of computer, laptop and mobiles were taken in hard disk and certain gadgets were impounded. After verification of the back-up data, the authority found one undisclosed bank account of the assessee in which there were credit entries of certain amounts. Further, a statement of the assessee was recorded under section 133 wherein he admitted that the alleged bank account was maintained by him and the same was opened and closed in the financial year 2013-14. On basis of same, the Assessing Officer had issued a reopening notice to the assessee. On writ, the High Court, while dismissing the petition, held:

Section 139 imposes an obligation on the assessee to furnish voluntarily a return of his total income and further makes it obligatory to disclose all material facts necessary for his assessment for that year fully and truly. Mere submission or production of books of account or other documents is not sufficient. Explanation 1 to section 147 of the Act explains that the production before the Assessing Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the provision.

In the facts of the case, the reasons for reopening cited by the Assessing Officer specifically recorded that the impugned bank account maintained was not reflected either in the books or in the return of income and upon physical verification of the Income-tax return and other documents like Income-tax statement details, annual information return, the undisclosed bank account as reported by the Investigating Wing was found to be unaccounted and accordingly, the authority finally came to the conclusion that, the income had escaped assessment. The authority had relied on the primary information of the undisclosed account and after independent inquiry and upon verification of the return of income and other documents, recorded his satisfaction and formed a reasonable belief that the income of the assessee had escaped assessment. The details available in the books of account or balance sheet or profit and loss account could not absolve the assessee of his obligation under section 147 as without any scrutiny, the original return was processed under section 143(1). There was enough material before the Assessing Officer and he was justified to reopen the assessment for the year under consideration. (R/Special Civil Application No. 20392 of 2019)

Hiteshkumar Babulal Ramani v. ACIT [2021] 432 ITR 403 (Guj)

56. S. 153: Assessment – Reassessment – Limitation – draft order to be passed within time limit specified in section 153(2A) – proceedings before DRP are not unfettered by limitation [S. 153(2A) and 144C]

Assessee’s case was selected for scrutiny and referred to the TPO and a draft order was passed and assessee filed objections before the DRP and a final order was passed against the assessee which was challenged before the Tribunal. The tribunal set aside the order and remanded the matter to the AO. The AO did not give effect to the same and only upon a refund communication from the assessee, the DRP issued notices to the assessee though the matter was remanded to the AO. The High Court held that notices issued by the DRP after a period of 4 years from date of tribunal order would be barred by limitation as per section 153(2A) of the Act. (WP Nos. 919, 922, 1068 and 1070 of 2020 dt. 23-12-2020) (AY.: 2009-10 & 2010-11)

Roca Bathroom Products (P.) Ltd. v. DRP-2, Bangalore (2021) 432 ITR 192 / 127 taxmann.com 332 (Mad.)(HC)

57. S. 153(A) : Assessment – Search or requisition – Assessee filed writ petition contending that there was violation of principles of natural justice as sufficient opportunity of hearing was not given to him – It was found that each and every objection raised by petitioner in his written representation had been considered by AO and it had rejected same by giving reasons – Hence, no violation of natural justice – Petitioner to file appeal u/s 246A.

On Writ file the High Court held that:

1. Loose sheets picked up during search u/s 132, falls within definition of ‘document’, mentioned in S.132(4) and therefore, it has got evidentiary value;

2. Where writ petition was filed raising a plea that assessment order was passed in violation of principles of natural justice, and if every objection raised by petitioner in his written representation had been considered by the AO and it had rejected the same by giving reasons, then even if such reasons for rejection given by AO were correct or not, could not be held to be violation of principles of natural justice;

3. There was no merit in writ petition and only remedy available to petitioner was to file statutory appeal under S.246A. (W.P.(MD) Nos. 9877, 9878, 10120, 10140, 10147, 10150 and 10156 of 2020) (AY 2012-13)

4. Vivek v. DCIT (2020) 121 taxmann.com 366 (Madras)

58. S. 153C: Assessment – Income of any other person – Search and Seizure – In absence of any incriminating documents or evidence discovered against assesse the assessment is bad in law. [S.12AA, 132]

Dismissing the appeal of the revenue the Court held that in absence of any incriminating documents or evidence discovered against assessee, during search upon TJR, jurisdiction under provisions of section 153C could not be assumed against assessee.

PCIT v. S.R. Trust (2021) 277 Taxman 133 (Mad.)(HC)

59. S.  220: Collection and recovery –Assessee deemed in default – Stay – Mere grant of stay of demand the assessee cannot be absolved from mandatory levy of interest. [S.220 (2)]

Dismissing the appeal of the revenue the Court held that it is well settled law that mere grant of stay does not prevent running of interest. Therefore, interest under section 220(2) was chargeable upon assessee even during period of stay of demand granted by Assessing Officer as interest is mandatorily leviable under section 220(2). (AY. 2007-08)

CIT v. Canara Bank (2021) 277 Taxman 414 (Karn.)(HC)

60. S. 226 : Collection and recovery – Modes of recovery – Sale proclamation – Appeals pending before appellate authorities disputing demand and for condonation of delay – Directions issued on facts and undertakings given by assessee to pay 15% of demand and expenses incurred by department for newspaper notifications

The petitioner, a partnership firm, dissolved in the year 2013. The AO levied tax and penalty on the firm and its partners by orders on 27th March, 2014. Thereafter, through a rectification order, the demand was enhanced. The appeal filed by the petitioner was dismissed. The petitioner not having challenged the appellate order within the prescribed period before the Tribunal, the Tax Recovery Officer proceeded under section 226 of the Income-tax Act, 1961. An order of attachment was passed and notice for settling the sale proclamation was issued. After the valuation was completed, the sale proclamation was issued and it was also published in the newspaper. On a writ petition contending that the Petitioner had already filed an appeal before the Tribunal with a petition for condonation of the delay, and that if the court were not to intervene the entire issue might become infructuous as the sale proceedings were to be held on 31st March, 2021 and seeking stay of demand till disposal of the appeal and undertaking to pay 15 per cent of the disputed demand :

The court observed that even before the appeal period could be exhausted the Department had proceeded to effect attachment of the property and that the petitioner obviously had some difficulties in pursuing the matter further due to the Covid-19 pandemic. Recording the undertakings of the petitioner to pay 15% of the demand within four weeks and to pay the cost incurred for publication in newspapers by the Department so far and his further undertaking to pay a sum of Rs. 50,000 within seven days the court directed the Department to keep all proceedings in abeyance for a period five months. (W. P. (MD) Nos. 1299, 1302 and 1433 of 2021 and W. M. P. (MD) Nos. 1089, 1090 and 1224 of 2021)

K. S. Santhosh Kumar v. ITO and Anr. (2021) 432 ITR 209 (Mad)

61. S. 240 : Refund – Appeal effect was not given for eight months – Court directed to pass appeal effect order and to grant refund along with interest [S.154, 244A, Art. 226]

Assessee made an application for refund, however appeal effect was not given for eight months. The assessee filed writ petition praying for rectification order. Allowing the petition the Court held that since revenue had delayed by eight months to pass appeal effect, directed the Assessing Officer to grant refund along with interest to assessee on immediate basis. (AY. 2011-12)

Agilent Technologies India (P.) Ltd. v. ACIT (2021) 277 Taxman 153 (Delhi)(HC)

62. S. 241A : Refund – Power to withhold in certain cases – Determination of tax liability not in domain of High Court except when an appeal is preferred under section 260A – In garb of a challenge section 241A order, ongoing assessment could not be challenged [Article 226 of Indian Constitution]

Assessee, in its return of income, claimed a refund of Rs. 226.72 crores, being the amount of tax deducted at source by the payer, from the payments made to the assessee on account of sale by assessee of shares of an Indian company and which payment was not chargeable to tax in India in terms of Article 13(4) of India-Mauritius DTAA. The return of income was picked up for scrutiny by the AO on 25-11-2019 by issuing a notice under section 143(2). On the same day, an intimation under section 143(1) was also issued, determining a refund of approximately Rs. 249.39 crores to be due to the assessee along with applicable interest. However, as the assessee had not received the refund amount, it filed a writ petition in the High Court, seeking a mandamus, directing the respondents to issue/grant refund due of Rs. 249.39 crores along with interest under section 244A. During pendency of writ petition, on 15-7-2020, assessee was served with a copy of the order under section 241A. Thus, writ petition was amended impugning order under section 241A to seek refund withheld by revenue. The High Court dismissed the writ petition and held:

(i) In the garb of a challenge to an order under section 241A, a challenge to assessment underway cannot ordinarily be adjudicated. The scrutiny thereunder has to be confined to, whether grant of refund is likely to adversely affect the revenue i.e., whether there is no basis whatsoever for the opinion formed that if refund is granted today, tax if any found due on completion tomorrow of assessment underway of the ITR claiming refund, will not be recoverable. However, in a gross case, where it is found that though a notice under section 143(2) has been issued but there is nothing to controvert the ITR, a High Court would be entitled to quash the section 241A order. However, in the facts of the present case, not only detailed reasons, have been given in the section 241A order but otherwise also lengthy arguments have been addressed and it is viewed that this case does not fall in the said category.

(ii) For the writ Court to quash the order under section 241A on the ground that no tax is due and thus question of refund likely to adversely affect the revenue does not arise, the Court has to conclusively hold that the assessee has no tax liability in India. Once it is so held, there will be nothing left to be determined in the assessment underway pursuant to notice under section 143(2).

(iii) The AO and the Commissioner, in exercise of powers under section 241A, are required to take a prima facie view of the outcome of the assessment pursuant to notice under section 143(2). They are also the authorities vested with the power of assessment. The authority vested with the power of final determination is the best authority to take a prima facie view. Moreover, the statute provides statutory remedies in the form of appeals, against the final determination by such authority. In such statutory scheme, under section 260A, appeal lies to the High Court against orders of the Income-tax Appellate Tribunal. A determination of tax liability in a challenge to an order under section 241A would set at naught the entire statutory scheme of assessment and appeals. (AY 2018-19) (W.P.(C.) No. 3617 of 2020)

GE Capital Mauritius Overseas Investments v. Deputy Commissioner of Income Tax & Anr. (2021) 200 DTR 153 / (2021) 320 CTR 162 / (2021) 433 ITR 270 (DELHI)

63. S. 245D : Settlement Commission – Educational institution – Application is allowed to be proceeded with – Settlement Commission have exclusive jurisdiction to perform functions of Income-tax authority as provided under section 245F of the Act -Withdrawal of exemption by Director General (Inv) was held to be not valid. [S.10 (23C)(iv), 132, 153A, 245C, 245F(2) Art, 226]

Assessee charitable trust was granted approval under section 10(23C)(iv) A search was conducted on assessee pursuant to which a notice under section 153A was issued . In pursuance of notice, assessee filed a settlement application under section 245C before Settlement Commission which was accepted. Based on initiation of proceeding under section 245C before Settlement Commission, DGI (Inv) issued a show cause notice to assessee proposing for withdrawal of approval granted to it under section 10(23C)(iv). He, further, proceeded to pass an order effecting withdrawal of approval under section 10(23C)(iv) of the Act. The assessee filed writ petition and contended that when issue regarding violation of conditions of section 10(23C) by assessee was pending before ITSC, DGI (Inv) had no jurisdiction to issue said show cause notice in view of bar under section 245F(2) . Settlement commission had completed proceedings and passed an order under section 245D in favour of assessee. Writ petition filed against order of Settlement Commission was also set aside. Allowing the petition the Court held that proceedings before Settlement Commission on which DGI(Inv) placed reliance to issue said show cause notice did not exist on facts, impugned show cause notice issued by DGI (Inv) for withdrawal of approval under section 10(23C) and subsequent order passed withdrawing such approval under said section were unjustified and same were to be quashed . When application under section 245C made by trust is allowed to be proceeded with Settlement Commission , then Settlement Commission have exclusive jurisdiction to perform functions of Income-tax authority as provided under section 245F of the Act. Accordingly the order of DGI (Inv) was quashed. (AY. 2005-06 to 2011-12)

Adhiprasakthi Charitable, Medical, Educational & Cultural Trust v. DGI (Inv)(2021) 277 Taxman 355 (Mad.)(HC)

64. S. 245D : Settlement commission – Second application is maintainable – Order of Settlement commission cannot be neither in violation of any statutory provisions of the Income-tax Act nor is there any defect in the decision making process – Writ of the revenue was dismissed. [S. 132, 245C, 245HA, Art 226]

The assessee filed settlement application under section 245C before the Income-tax Settlement Commission (ITSC) disclosing additional income. Application was rejected for non-payment of taxes on the additional income disclosed in the settlement application. Subsequently the assesseee filed on more application which was accepted by the Settlement commission. Department has filed writ petition against the order of the settlement commission. Dismissing the petition the Court held that here is no bar for filing of a second application before the ITSC, when the earlier application was ‘not allowed’ to be proceeded with under section 245D(1). Section 245K(2) prohibits a subsequent application, only when the assessee had earlier made an application under section 245C and such an application has been ‘allowed’ to be proceeded with under section 245D(1). In contrast, there is no provision under the Income-tax Act, debarring the assessee from subsequently making an application after his original application was ‘rejected’ under section 245D(1) and ‘not allowed’ to be proceeded with. The fundamental requirement of the application under section 245C(1) is that the full and true disclosure of the income has to be made, along with the manner in which such income was derived. What requires to be taken into account by the ITSC is as to whether the assessee had explained the manner in which the additional income which was not disclosed before the Assessing Officer, has been disclosed in the application or not and whether, such a disclosure is a full and fair disclosure. This would basically be a factual aspect. Court held that there is neither in violation of any statutory provisions of the Income-tax Act nor is there any defect in the decision making process. Accordingly the writ petition was dismissed (AY. 2007-08 to 2011-12)

CIT v. Adhiparasakthi Charitable Medical, Educational & Cultural Trust (2021) 277 Taxman 333 (Mad.)(HC)

65. S. 245R : Advance rulings – Procedure – Application – Notices issued prior to date of filing application cannot be a bar for admitting the application – issues involved not pending before any income-tax authority – Application admitted [S. 245R(2)]

Assessee filed an application for advance ruling under section 245Q of the Act on 30-11-2018 on the issue of whether dividend distribution tax (DDT) paid to its shareholder is a tax on dividend and whether benefit of lower rate of 10% under the treaty applies. The AAR observed that notices were issued to the assessee under section 143(2) and 142(1) of the Act on 3-7-2017 and 9-7-2018 respectively. However, the issue of DDT was not present in these notices and the claim for refund was made after filing the present application. Thus, the questions raised in the present application were not found pending before any income-tax authority on the date of filing of the application under section 245R(2) and the application was admitted under section 245R(2). (AAR No. 25 of 2018 dt. 2-2-2021)

Mitsui Kinzoku Components India (P.) Ltd., In re (2021) 433 ITR 137 / 124 taxmann.com 150 (AAR-New Delhi)

66. S. 254 : Appellate Tribunal – Orders – Ex parte order passed on the ground of non-appearance and not on merits – Notwithstanding delay on part of assessee challenging tribunal order – Ex-patre order quashed and appeal restored back [S. 254 r.w.r 24 of ITAT rules]

The Tribunal passed an ex parte order dismissing the assessee appeal on the ground of non-appearance on two consecutive hearings. Assessee filed an application recalling the order of the tribunal and pleaded restoration of the appeal due to the ill health of the assessee. High Court held that the non-adjudication of the matter on merits by the Tribunal and dismissing the appeal on the ground of non-prosecution and non-appearance of the assessee is violative of Rule 24 of the Income-tax Appellate Tribunal Rules. Delay on part of assessee in challenging order of the tribunal could not have been dismissed applying period of limitation and order passed by the Tribunal quashed and appeal restored back to the Tribunal. (WP (C) No. 2229 of 2021 dt. 19-02-2021) (AY.:2008-09)

Pradeep Kumar Jindal v. PCIT (2021) 432 ITR 48 / 279 Taxman 14 / 126 taxmann.com 86 (Del.)(HC)

67. S. 254(2) : Appellate Tribunal – Orders – Rectification of mistake apparent from the record –Condonation of delay in filing application under S. 254(2) – As per R. 24 Tribunal was not justified in dismissing the appeals filed by the assessee in limine in absence of either the appellant or its Authorized Representative – Period of limitation prescribed in S. 254(2) would commence from the date the affected party got knowledge of the decision in question and it would not commence from the date the order was passed – Present appeals have been filed on 22nd June, 2020 in the midst of the lockdown –Aforesaid events are thus found sufficient to condone the delay subject to imposing costs on the applicant [r.w.s 254(1)]

Held by the High Court that:

In view of the provisions of Rule 24 of the ITAT Rules, 1963, the Tribunal was not justified in dismissing the appeals filed by the assessee in limine in absence of either the Appellant or its Authorized Representative. Further, period of limitation prescribed in S. 254(2) would commence from the date the affected party got knowledge of the decision in question and it would not commence from the date the order was passed. Hence, Assessee having explained reasons for delay, the delay is condoned subject to costs. [ITA Nos. 6304, 6309 & 6320 of 2020, dated 16-10-2020] (AY. 2002-03)

DaryapurShetkariSahakari Ginning and Pressing Factory v. ACIT (2021) 320 CTR 456 / 200 DTR 417 / 277 Taxman 155 (Bom)(HC)

68. S. 254(1) : Appellate Tribunal – Orders – Recalling of ex parte order – Rule 24 of ITAT Rules mandates that when the appeal is called on for hearing and the Appellant does not appear –Tribunal is required to dispose of the appeal on merits after hearing the respondent – Order passed by Tribunal holding that the Assessee is not interested in prosecuting the appeals is unsustainable.

On appeal the High Court that the Tribunal was not justified in dismissing the appeals in limine for non-appearance of the Assessee holding that the assessee is not interested in prosecuting the appeals; Tribunal was duty bound to decide the appeals on merits after hearing the Revenue. Matter remanded back to CIT(A).(ITA No. 12 to 14 of 2020, dt. 24-11-2020)(AY. 2002-03 and AY 2003-04)

DaryapurShetkariSahakari Ginning and Pressing Factory v. ACIT(2021) 319 CTR 70 / 198 DTR 125 / 432 ITR 130 (Bom) (HC)

69. S. 246A : Appeal – Commissioner (Appeals) – Appealable orders – Appeal would be maintainable in respect of subject matter which do not pertain to grounds under section 263 of the Act. [S.43, 251, 263]

Assessing Officer made disallowance on account of privilege fee paid by assessee to State Government under section 43B of the Act. During pendency of appeal filed by assessee before Commissioner (Appeals), a notice under section 263 was issued by Commissioner on ground that leave salary contribution and electricity charges paid by assessee were allowed as deduction by Assessing Officer without any examination CIT (A) without examining appeal preferred by assessee regarding disallowance of privilege fee dismissed same as being infructuous. Order of CIT (A) affirmed by the Tribunal. On appeal High Court held that Commissioner (Appeals) ought to have adjudicated appeal on merits regarding disallowance of privilege fee under section 43B and, accordingly, impugned order passed by Commissioner (Appeals) was to be quashed and matter was to be remanded back to him to decide accordance with law. (AY. 2004-05)

Karnataka State Beverages Corporation Ltd. v. ACIT (2021) 277 Taxman 58 (Karn.)(HC)

70. S. 254(1) : Appellate Tribunal – Duties – Charitable purpose – Questions concerning relations between employers and employees in Southern India in order to protect their interests – No finding as regards the activity of the trust whether commercial – Matter remanded to the Assessing Officer [S. 2(15), 11]

Assessing Officer denied same on ground that assessee received aggregate income of more than Rs.10 lakhs in nature of fees and, as such, it would come within purview of second proviso under section 2(15). Tribunal affirmed the order of the Assessing Officer denied benefit of section 11 to assessee taking view that substantial sums of money were received by assessee from conducting conferences and seminars which were open to persons other than its members, and this being major activity of assessee as projected in its Annual Report, it could not be considered as an activity incidental to its main objects. On appeal the Court held that since lower authorities had not rendered any finding that activity carried out by assessee was a commercial activity, benefit of exemption could not have been denied to assessee. A Whether, accordingly order of Tribunal was to be set aside and matter was to be remanded to Assessing Officer to take fresh decision. Referred CBDT Circular No. 11/2008, dated 19-12-2008 (AY.2009-10)

Employers Federations of Southern India v. CIT (E) (2021) 277 Taxman 266 (Mad.)(HC)

71. S. 254(1) : Appellate Tribunal – Duties – Free trade zone – Not deciding the grounds raised by observing that the academic – Tribunal directed to decide the ground on merit [S. 10A]

Assessee provided software development services. It claimed deduction under section 10A. Assessing Officer denied benefit of deduction to some units on ground that these were not set up in accordance with STPI scheme. It was further held that income earned by assessee in nature of recruitment fee should be excluded from eligible profits. On appeal, Commissioner (Appeals) partially allowed relief to assessee, however, Commissioner (Appeals) denied relief in respect of recruitment fees on ground that such activity had no nexus with activity of export of computer software. Tribunal affirmed said order without deciding grounds raised by assessee and held that same were academic. On appeal the Court held that Tribunal ought to have adjudicated grounds raised by assessee on merits instead of holding same to be academic and not deciding accordingly. Matter remanded to Tribunal. (AY. 2005-06)

NTT Data Global Delivery Services Ltd. v. ACIT (2021) 277 Taxman 143 (Karn.)(HC)

72. S. 254(1) : Appellate Tribunal – Duties – Property held for charitable purposes – Purchase of gold bullion – Application of income – Matter remanded to the Tribunal. [S. 11(5), 12AA, 13 (1)(d)]

Assessee is an educational charitable trust registered under section 12AA. During year, assessee purchased gold bullion. Tribunal held that purchase of gold by assessee was not application of funds for object of trust but an investment in violation of section 11(5). On appeal it was contended that as per proviso (iia) to section 13(1)(d) it could hold such gold bullion for a period of one year from end of previous year in which same was acquired, thus, there was no violation of section 11(5). High Court held that the Tribunal has not dealt with the issue in their order. Accordingly the matter was remanded (AY. 2010-11)

Sri Venkkaliamman Educational and Charitable Trust v. Dy. CIT (2021) 277 Taxman 257 (Mad.)(HC)

73. S. 254(1) : Appellate Tribunal – Powers – Deduction at source – Tribunal admitted the additional evidence and remanded the matter to decide afresh – Order of Tribunal is affirmed [S.40(a)(ia)]

Assessee filed an appeal against the remand order passed by the Tribunal. High Court affirmed the order and also modified the direction of the Appellate Tribunal in case, the Commissioner (Appeals) deems it appropriate, he shall be at liberty to seek the remand report from the Assessing Officer and, thereafter, to decide the matter afresh in accordance with law. (AY. 2006-07)

C.S. Raghoji (Bellary) v. Dy. CIT (2021) 277 Taxman 61 (Karn)(HC)

74. S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Delay of 3052 days – Period of limitation would commence from date when affected party got knowledge of decision in question and it would not commence from date when order was passed- Tribunal cannot dismiss the appeal for non-appearance, it has to decide on merits – Cost of Rs 10,000 was imposed on the assessee for each year of appeal. [S.254(1), 260A]

Tribunal by an order dated 01-02-2013 dismissed assessee’s appeal against an assessment order making addition to income of assessee for default of appearance by assessee. On
19-11-2019 Tax Recovery Officer proceeded to attach immovable properties of assessee for tax recovery. Thereafter, on 30-12-2019 assessee filed an application before Tribunal to set aside its order dated 1-2-2013 and rehear appeal on merits along with an application for condonation of delay of 3052 days in seeking restoration of appeal Tribunal dismissed both of these applications. On appeal the Assessee contended that Tribunal was not justified in dismissing appeal of assessee merely for absence of any representation on behalf of assessee. It further contended that period of limitation would begin to run from date when assessee got knowledge of order i.e. on 19-11-2019 and not from date of passing of order. On appeal the Court held that Tribunal has to dispose of an appeal on merits and it cannot dismiss same solely on account of non-appearance of a party, thus, impugned order of Tribunal dismissing assessee’s appeal merely for default of appearance was unjustified and same was to be set aside. Court also held that period of limitation prescribed in section 254(2) would commence from date when affected party got knowledge of decision in question and it would not commence from date when order was passed. Accordingly period of limitation would commence only from 19-11-2019 which was date of obtaining knowledge of order dated 1-2-2013 and, accordingly, impugned application filed by assessee was not barred by limitation. Court also held that from December 2019 till March 2020, the applicant had taken various steps in its attempt to have the appeals restored. The present appeals have been filed on 22-6-2020 in the midst of the lockdown. The aforesaid events are thus found sufficient to condone the delay subject to imposing costs on the applicant. Accordingly the delay in filing each appeal stands condoned subject to costs of Rupees Ten thousand per appeal to be paid to the Revenue within a period of three weeks. The applications are allowed and disposed of in aforesaid term. (AY. 2002-03 to 2004-05)

Daryapur Shetkari Sahakari Ginning and Pressing Factory v. ACIT (2021) 277 Taxman 155/ 200 DTR 417/ 320 CTR 456 (Bom.)(HC)

75. S. 254(2A): Appellate Tribunal – Stay – Rejection of stay petition – No perversity or erroneous approach on part of Tribunal in not granting interim order – Order of Tribunal is affirmed. [S.254 (1), Art.226]

The assessee filed stay petition before the Tribunal, which was rejected by the Tribunal. On writ the Court held there was no perversity in the order, the rejection of stay petition is held to be proper ad justified (AY. 2013-14)

Sporting Pastime India Ltd. v. Assistant Registrar, Chennai (2021) 277 Taxman 19 (Mad.)(HC)

76. S. 260A : Appeal – High Court – Only if the finding of fact of the tribunal is perverse can the question of correctness of the order in appeal arise. [S. 260A]

TPO passed an order with a direction to the AO to compute the total income in accordance with section 92(4). Since, the assessee had not objected to any orders passed by all hierarchy authorities it was precluded from raising such a contention before the High Court. Further, having not raised any objection with regard to jurisdiction assessee cannot now state that the entire proceedings are vitiated as it complied with the demand notices. No substantial question of law arises. (TC Appeal No. 458 of 2018 dt. 19-03-2021) (AY.:2003-04)

POS Hyundai Steel Manufacturing (P.) Ltd. v. CIT (2021) 320 CTR 241 / 200 DTR 382 / 125 taxmann.com 383 (Mad.)(HC)

77. S. 260A : Appeal – High Court – Financial incapacity to pay tax in AY 2007-08 does not warrant levy of penalty under section 221 in AY 2008-09 – Not a curable defect under section 292B – Tribunal order quashed [S. 140A(3), 221, 260A and 292B]

Assessee filed its return of income declaring an income of Rs. 4,07,660. AO passed a penalty order levying penalty of 50 lakh for AY 2008-09. Assessee’s contention is that penalty has been levied in AY 2008-09 based on facts of AY 2007-08. Assessee appealed before the CIT(A) and tribunal has been dismissed. On appeal, the High Court held that the assessee has paid tax in AY 2008-09 and it is not in dispute that assessee has committed a default in AY 2007-08 where it did not pay the tax on account of financial hardship. Section 292B would not apply and the tribunal order quashed and matter remitted back to the tribunal. (ITA No. 249 of 2011 dt. 1-2-2021)(AY.2008-09)

M/s. SSS Projects Ltd. (Rep. by its Managing Director Sri. K. Sathish Kumar) v. DCIT (2021) 432 ITR 201 / 110 CCH 188 (Kar.)(HC)

78. S. 260A : Appeal – High Court – Arguments not taken in appeal cannot be agitated. [S. 37]

Loss arising from fluctuation of foreign exchange rate was claimed as deductible by the assessee following the judgement of the Supreme Court in the case of CIT v. Woodward Governer India Pvt. Ltd. (312 ITR 254). In the course of the hearing before the High Court, the department’s counsel urged that the conditions set out in Woodward Governer were not satisfied. Held that this allegation of the department’s Council was not urged in the appeal and could, therefore, not be gone into by the High Court. It was further noted that in the year in which fluctuation of foreign exchange rate resulted in gains, the same were offered to tax by the assessee. Accordingly, the department’s appeal was dismissed. (A.Y. 2010-11)

Principal Commissioner Of Income Tax v. HCL Comnet Systems & Services Ltd. (2021) 433 ITR 251 (Delhi)

79. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Depreciation – Order passed by Assessing Officer relying on the decision of Tribunal – Subsequently reversed by High Court – Revision is not be not valid [S.32]

Dismissing the appeal of revenue the Court held that Order passed by Assessing Officer relying on the decision of Tribunal which was Subsequently reversed by High Court. Revision is not being not valid. (AY. 2009-10)

CIT v. Canara Bank (2021) 277 Taxman 215 (Karn)(HC)

80. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Revision valid when there was non-application of mind by the AO.

Where the AO had only called for information, but not applied his mind to such information, it would not be a case of thorough enquiry and is open to revision under section 263. Where the CIT records a prima facie opinion regarding an addition/ disallowance, it cannot be said that the CIT has himself not carried out necessary enquiries. (A.Y. 2009-10)

Principal Commissioner Of Income Tax, Panaji v. Zuari Maroc Phosphates Ltd. [2021] 432 ITR 316 (Bombay)

81. S. 271(1)(c) : Penalty – Concealment – Not recording satisfaction – Not striking irrelevant portion in the notice – Levy of penalty is not valid [S. 260A]

Dismissing the appeal of the revenue the Court held that the Assessing Officer has not recorded satisfaction and even not – striking irrelevant portion in the notice, hence the deletion of penalty is held to be valid. Relied on CIT v. Shri Samson Perinchery (2017) 392 ITR 4 (Bom) (HC) Pr. CIT v. New Era Sova Mine (2020) 420 ITR 376 (Bom) (HC)

PCIT v. Golden Peace Hotels and Resorts (P.) Ltd (2021) 124 taxmann.com 248 (Bom.) (HC)

Editorial : SLP of revenue is dismissed, PCIT v. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 277 Taxman 595 (SC)

82. S. 271(1)(c) : Penalty – Concealment – Non striking off of the irrelevant part while issuing notice makes the order bad in law – assessee should be informed of the grounds of penalty proceedings through statutory notice and an omnibus notice suffers from the vice of vagueness [S. 271(1)(c)]

The High Court was dealing with the issue of whether a mere defect in the notice (failure of an income-tax authority to tick mark the applicable grounds in the notice / non striking off the irrelevant matter) under section 271 of the Act vitiate the entire penalty proceedings. The Court held that the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. The court distinguished the decisions of CIT v. Kaushalya (Smt) (1995) 216 ITR 660 (Bom)(HC), Ventura Textiles Ltd. v. CIT (2020) 426 ITR 478 (Bom)(HC) and followed the decision of Dilip N. Shroff v. JCIT (2007) 291 ITR 519 (SC) and Samson Perinchery (392 ITR 4)(Bom HC).(ITA No. 51 and 57 of 2012 dt. 11-03-2021) (AY.:2006-07 and AY 2007-08)

Mohd. Farhan A. Shaikh v. ACIT (2021) 434 ITR 1 / 125 taxmann.com 253 (Bom.)(HC)(FB)

83. S. 274 : Penalty – Procedure – Not striking off the irrelevant limb. [S. 271(1)(c)]

Where in the notice issued under section 274 of the Act, the irrelevant limb (concealment of income or furnishing of inaccurate particulars of income) was not struck off, the penalty proceedings were bad in law and were to be quashed.

Principal Commissioner Of Income Tax v. Goa Dourado Promotions Pvt. Ltd. (2021) 433 ITR 268 (Bom)

84. S. 274 : Penalty – Procedure – Not striking off the irrelevant limb. [S. 271(1)(c)]

Where in the notice issued under section 274 of the Act, the irrelevant limb (concealment of income or furnishing of inaccurate particulars of income) was not struck off, the penalty proceedings were bad in law and were to be quashed.

Principal Commissioner Of Income Tax v. New Era Sova Mine (2021) 433 ITR 249 (Bom)

85. S. 276C : Offences and prosecutions – Wilful attempt to evade tax – Concealment of income – Failure to disclose capital gains- Application for quashing of proceedings was rejected. [S. 45, 278E, CPC, S. 313]

The assessee did not disclose short term capital gains in the return of income. The Assessing Officer made addition and also prosecution under section 276C of the Act. The assessee moved application before the High Court for quashing the prosecution proceedings. Dismissing the petition the Court held the order of assessment had nothing to do with prosecution proceedings under section 276C and same were separate and distinct from assessment proceedings .Accordingly on facts, impugned proceedings against assessee were justified and same was to be upheld. The trial Court was directed to complete the trial within a period of six months from the date of receipt of copy of this Order. (AY. 2008-09)

Rohit Kumar Nemchand Piparia v. Dy. DIT (2021) 277 Taxman 549 (Mad.)(HC)

86. S. 276C : Offences and prosecutions – Wilful attempt to evade tax – Failure to file return – Refund due to assessee – Abuse of process of law – Prosecution was quashed. [S 139 (1), 276C(1)(i), 276CC Cr .P.C, S.482]

The return filed by the petitioner in the year 2013-14 shows that tax payable by the petitioner is nil and he is also claiming for refund of the tax payable have been adjusted against the advance tax payable and tax deducted at source for the assessment year 2013-14. The return filed by the petitioner for the year 2013-14 shows that tax payable by the petitioner and his claiming for refund of the tax payable have been adjustable against the advance payable and the source for the assessment year 2013-14. The revenue launched prosecution against the assessee under section 276C (1)(i) and section 276CC of the Act. The assessee moved application before the High Court to quash the prosecution proceedings. Allowing the petition the Court held that considering the facts of the case launching of prosecution is nothing but clear abuse of process of law, it could not be sustained. (AY.2013-14)

Rajkumar Thiyagarajan v. Income Tax Department, Madurai (2021) 277 Taxman 437 (Mad.)(HC)

87. S. 276C : Offences and prosecutions – Wilful attempt to evade tax – Quantum and penalty appeal was pending – Prosecution is stayed until final judgement was delivered by Tribunal in pending appeal. [S.143(3), 156, 271 (1)(c) Code of Criminal Procedure, S.482]

The quantum and penalty appeal was pending before the Tribunal Principal Commissioner initiated criminal proceedings under section 276C(2) against assessee for evading tax . The assessee filed petition . Court held that when the demand raised by the Department is not crystallized as the appeal preferred by the petitioner is pending adjudication on merits. Considering the aforesaid factual scenario and since the petitioner has already deposited a substantial part of the demand raised by the Department, this Court is of the opinion that the continuation of the prosecution against the petitioner for the same allegations could not be permitted. Court also observed that the passing of this order will not preclude the Department from considering the case of the petitioner under the “Vivad se Vishwas Scheme” in view of the object of the scheme and particularly when the petitioner has already deposited a substantial part of the demand. (AY. 2011-12)

Hemal Manubhai Patel v. State of Gujarat (2021) 277 Taxman 323 / 200 DTR 57 (Guj.)(HC)

88. S. 277 r.w.s 276C : Offences and prosecutions – False statement – Verification – Misstatement – Where assessee had been forced to upload returns by mentioning that entire amount of tax as otherwise returns would not have been accepted by software system – It could not be said to be misstatement within meaning and definition thereof u/s 277, as said statement made had been forced upon assessee by Income Tax Department – Held, yes

On a criminal petition filed, the High Court held that for an offence to be said to be committed u/s 277, the misstatement is required to be wilful made with a mala fide or dishonest intention in order to prosecute the assessee.

89. S. 276Cr.w.s277 : Offences and prosecutions – Willful attempt to evade tax – Whether delayed payment of tax would not amount to evasion of tax, so long as there is payment of tax, more so for reason that in returns filed there is an acknowledgement of tax due to be paid – Held, yes

On a criminal petition filed, the High Court held that delayed payment of income tax would not amount to evasion of tax, so long as there is payment of tax, more so for reason that in returns filed there is an acknowledgement of tax due to be paid.

90. S. 276C r.w.s277 :Offences and prosecutions – Willful attempt to evade tax – Whether all directors of Company cannot be automatically prosecuted for any violation of Income-tax Act – Held, yes – Whether there has to be specific allegations made against each of Directors who is intended to be prosecuted – Held, yes

On a criminal petition filed, the High Court held that all directors of company cannot be automatically prosecuted without specific allegations made against each of directors who is intended to be prosecuted for any violation of tax laws. Such specific allegation would have to amount to an offence and satisfy the requirement of that particular provision under which the prosecution is sought to be initiated and preliminary investigation has to be concluded, more so when the prosecution is initiated by the Income Tax Department who has all the requisite material in its possession.

91. Section 292 r.w.s 191 and 204 of the Code of Criminal Procedure, 1973 – Cognizance of offences – Whether at time of taking cognizance of an offence and issuance of process, Court taking cognizance is required to pass a sufficiently detailed order to support conclusion to take cognizance and issue process – Held, yes

On a criminal petition filed, the High Court held that at time of taking cognisance and issuance of process, Court taking cognisance is required to pass a sufficiently detailed order to support conclusion to take cognisance and issue process. (Criminal Petition Nos. 5480 and 5481 of 2016, dt. 01/28/2021) (AY 2013-14)

Confident Projects (India) (P.) Ltd. v. Income Tax Department, Bengaluru, (2021) 124 taxmann.com 36 (Karnataka)(HC)