1. S. 12AA : Procedure for registration – Trust or institution – Bogus donation – Appellate Tribunal remanded the matter for grant of opportunity to assessee to cross examine representative of donor – High Court quashing cancellation of registration on the ground that single instance of bogus donation cannot be the sole ground for cancellation of registration Order of High Court is set aside and the Commissioner directed to decide on merits [S. 12AA(3), 80G(5) (vi)]

   Allowing the appeal of the Revenue the Court held that the Appellate Tribunal remanded the matter for grant of opportunity to assessee to cross examine representative of donor, the High Court quashed cancellation of registration on the ground that single instance of bogus donation cannot be the sole ground for cancellation of registration. Order of High Court was set aside and the Commissioner directed to decide on merits. (Note Judgment of Calcutta High Court is reported in (2019) 411 ITR 236.

   CIT v. Jagannath Gupta Family Trust (2019) 411 ITR 235 (SC)

2. S. 14A : Disallowance of expenditure – Exempt income – In the absence of any exempt income no disallowance can be made [R.8D ]

   In the absence of any exempt income, no disallowance is permissible (CIT v. Essar Teleholdings Ltd. (2018) 401 ITR 445 (SC) followed, Cheminvest Ltd v. CIT (2015) 378 ITR 33 (Delhi)(HC) approved). (SLP No. 2755/2019, dt. 16-2-2018)

   PCIT v. Oil Industries Development Board (2019) 262 Taxman 102 (SC), www.itatonline.org
   

   Editorial: PCIT v. Oil Industries Development Board (2019) 103 taxmann.com 325 (Delhi)(HC) is affirmed. (ITA No. 187/2018 dt 16-2-2018)

3. S. 43B : Deductions on actual payment – Interest payable to Banks – Conversion of unpaid interest into funded interest Loan – Not allowable as deduction – Explanation 3C to section 43B inserted with retrospective effect from 1-4-1989 by the Finance Act, 2006.

   Allowing the appeal of the Revenue the Court held that conversion of unpaid interest into funded interest Loan is not allowable as deduction in view of Explanation 3C to section 43B inserted with retrospective effect from 1-4-1989, by the Finance Act, 2006. (AY. 2001-02)

   CIT v. Gujarat Cypromet Ltd. ( 2019) 412 ITR 397 (SC)

   Editorial: Decision in CIT v Gujarat Cypromet Ltd. (2019] 412 ITR 398 (Guj.) (HC) reversed.

4. S. 80HHD : Convertible foreign exchange – Hotel – Tour operator – Double deduction under Chapter VIA – Entitlement of deduction under diverse provisions in respect of same income – Matter referred to larger Bench [ S.80IA ]

   The question before the High Court was whether an assessee was entitled to claim deductions under diverse provisions in respect of same income, if assessee qualified under various provisions. i.e. S. 80HHD and 80-IA. Following the judgment in EIH Ltd v. CIT (2011) 338 ITR 503 (Cal.) (HC) the Court held that if assessee was entitled to claim deduction under more than one head, the assessee must be left free to do so, subject to deduction not being more than income earned under such head. Issue had been referred to a larger bench for reconsideration in ACIT v. Micro Labs Ltd (2016) 380 ITR 1 (SC). Following the same SLP of Revenue is was allowed and matter directed to be listed along with SLP (Civil) No. 19005/ 2012.

   PCIT v. E.I.H. Ltd. (2019) 262 Taxman 6 (SC)

   Editorial : Refer PCIT v. E.I.H. Ltd. (2019) 103 taxmann. com 203 (Cal.) (HC) / 262 Taxman 7 (Cal.) (HC)

5. S. 139AA : Quoting of Aadhaar number – From assessment years 2019-20, linkage of PAN with Aadhaar card is mandatory

   High Court had permitted the assessee to file Income tax returns for the assessment year 2018-19 without linking their Aadhaar and PAN numbers and also directed that Income Tax Department would not insist on

   production of their Aadhaar number. When the High Court passed the order the matter was spending before the Supreme Court. Thereafter Supreme Court decided the matter and upheld vires of section 139AA of the Act. In view thereof, linkage of PAN with Aadhaar card was mandatory. As the assessment for the assessment year 2018-19 was completed, for the subsequent assessment years Income tax Return shall be filed in conformity to Supreme Court order.

   UO v. Shreya Sen (2019) 262 Taxman 370 /174

   DTR 265/ 306 CTR 609 (SC)

   Editorial : Shreya Sen v. UOI ( 2018) 257 taxman

   95/ 407 ITR 37 (Delhi) (HC) (para 3) reversed.

6. S. 142(2C) : Inquiry before assessment – Special audit – AO is entitle to suo motu extend the time without an application by the assessee – The amendment by FA 2008 was intended to remove an ambiguity and is clarificatory in nature – There exists a presumption of retrospective application in regard to amendments which are of a procedural nature – Orders of High Courts set aside and matter remanded to Appellate Tribunal to decide on merits. [S. 142, 153A, 153B]

   The Division Bench of the Delhi High Court in a batch of appeals filed by the Revenue against the order of Tribunal came to the conclusion that prior to insertion of the expression “suo motu” with effect from 1 April 2008 in Section 142(2C), the Assessing Officer had no jurisdiction to extend time for the submission of the report of an auditor appointed under

   sub-section (2A) of his own accord. As a consequence, it was held that the assessment which was made under Section 153A, in respect of the assessment in question was barred by limitation. The assessee contended that the Assessing Officer had no jurisdiction or authority under section 142(2C), as it stood prior to 1st April 2008 to extend time for the submission of the audit report of the auditor appointed under the provisions of sub section (2A). In essence, the submission is that the assessing officer was authorised to extend time (not exceeding 180 days) from The date on which a direction under sub-section (2A) was received by the assessee, only on an application made by the assessee and for any good and sufficient reason. If the assessee made an application, the Assessing Officer would have no jurisdiction to extend time. Revenue adopted a contrary position submitting that even before 1st April, 2008, the jurisdiction of the assessing Officer to extend time for submission of audit report was not confined to a situation in which the assessee had made an application for extension. Consequently, the incorporation of a provision for a suo motu exercise of power by the Assessing Officer, with effect from 1st April 2008 by the Finance Act 2008 was only intended to remove an ambiguity and was clarificatory in nature. Allowing the appeal of the Revenue the Court held that the AO who has fixed the time in the first instance must necessarily, as an incident of the authority to fix time, be entitled to suo motu extend time without an application by the assessee. The amendment by FA 2008 was intended to remove an ambiguity and is clarificatory in nature. There exists a presumption of retrospective application in regard to amendments which are of a procedural nature. Order of High Court was set aside and matter restored to the file of Appellate Tribunal to decide on merits. (CA. No. 3211 of 2019, dated 26-3-2019).

   CIT v. Rama Kishan Dass (2019) 103 taxmann.com 4 14 /276 DTR 225/ 307 CTR 777 (SC), www.itatonline.org.

   Editorial: Order in CIT v. Bishan Swaroop Ram Kishan Agro Pvt. Ltd. (2011) 203 Taxman 326 (Delhi) (HC) is reversed.

7. S. 147: Reassessment – Change of opinion – High Court was directed to decide whether requirement of S.148 was satisfied or not [S.143(1), 143(3)]

   Allowing the appeal of the Revenue the Court held that, High Court should decide (i) validity of S. 148 notice where assessment is made u/s 143(1) & not u/s 143(3), (ii) whether notice can be said to be based on change of opinion if there is no foundation to form any such opinion, (iii) Whether requirements of S. 148 are satisfied, namely, that it contains the facts constituting the “reasons to believe” and furnishes the necessary details for assessing the escaped income and (iv) whether finding recorded by ITAT on merits is legally sustainable. (CA No. 3450 of 2019, dt. 08.04.2019)(AY. 1999-00).

   PCIT v. Nokia India Pvt. Ltd. (2019) 413 ITR 146/ 176 DTR 291 / 308 CTR 20 (SC), www.itatonline. org

   Editorial: Order in ( ITA No. 854 of 2016 dt. 21-04 2017 ) PCIT v. Nokia India Pvt. Ltd. ( Delhi) (HC) is set aside

8. S. 245D : Settlement Commission- Power – Settlement Commission does not have power to reduce or waive interest statutorily payable under S. 234A, 234B, and 234C of the Act – Matter remanded to Settlement Commission. [S. 154, 234A, 234B, 234C, 245D(4), 245D(6), 245F]

   Settlement Commission while passing the order u/s 245D(4) made certain addition and also waived the interest levied u/s. 234A, 234B and 234C of the Act. On rectification application filed by the Revenue the Settlement Commission partly allowed the application. Being aggrieved by the order of Settlement Commission the assessee filed two writ petitions before the High Court. High Court set aside the rectification order passed by the Settlement Commission. Being aggrieved Revenue filed two petitions before the High Court. High Court reversed the waiver of interest in terms of Settlement Commission‘s direction contained in its order dated 11-10-2002. On appeal the Court held that, when Settlement Commission passed first order disposing of assessee’s application, issue with regard to powers of Commission was not settled by any decision of Apex Court. Decisions in CIT v. Anjum M. H. Ghaswala (1997) 252 ITR 1 (SC)
   and Brij Lal v. CIT ( 2010) 328 ITR 477 (SC), were rendered after Settlement Commission passed order in present case. Therefore, Commission had no occasion to examine issue in question in context of law laid down by this Court in those two decisions. High Court instead of going into merits of issue, should have set aside original order passed by Commission and remanded case to Commission for deciding issue relating to waiver of interest payable under Ss 234A, 234B, and 234C afresh. High Court failed to see that order of Commission was already set aside by High Court itself in first round in light of law laid down by in case of Brij Lal wherein, it was laid down that Commission had no power to pass orders u/s 154. Order passed by Settlement Commission to the extent it decided issue in relation to waiver of interest was set aside and case was remanded to Commission to decide issue afresh. Settlement Commission in exercise of its power under Sections 245-D(4) and (6) does not have the power to reduce or waive interest statutorily payable under Sections 234-A, 234-B and 234-C except to the extent of granting relief under the circulars issued by the Board under Section 119 of the Act.

   Kakadia Builders Pvt. Ltd. v. ITO (2019) 412 ITR 128 / 175 DTR 305 / 307 CTR 369 / / 262 Taxman 268 (SC)

   Editorial: Refer Kakadia Builders Pvt. Ltd. v. ITO (2014) 362 ITR 342 (Guj) (HC)

9. S. 260A : Appeal – High Court – Where High Court does not dismiss appeal in limine but has dismissed it after hearing both parties, in such a situation, High Court should frame questions and answer them by assigning reasons accordingly one way or other – Matter remanded – Duty to record reasons. [S. 260A(4), 260A(5)]

   Allowing the appeal of the Revenue the Court held that; where High Court does not dismiss appeal in limine but after hearing both parties, in such a situation, High Court should frame questions and answer them by assigning reasons accordingly one way or other by exercising powers under sub-sections (4) and (5) of section 260A of the Act. Accordingly the matter was remanded. Every order or judgment which decides a lis between parties must contain the reasons or grounds for arriving at a particular conclusion. Indeed, what is decisive for deciding the case is not the conclusion alone but the reasons or grounds assigned in support of such conclusion, which results in reaching such conclusion. In order to decide whether or not an order is legally sustainable, the Appellate Court is entitled to know what impelled the Court below to pass such order in favour of one party and against the aggrieved party. (AY. 1987-88 to 4-9-1997)

   CIT v. Rashtradoot (HUF) (2019) 412 ITR 17 /262 Taxman 360 / 175 DTR 265/ 307 CTR 375 (SC)

   Editorial: Arising from the order of High Court in CIT v. Rashtradoot (HUF) (2019) 104 taxmann.com 3 ( Raj) (HC)

10. S. 260A : Appeal – High Court – Revision – Amortisation of preliminary expenses – Bank – Expenses in relation to initial public offer – Revision was quashed by Appellate Tribunal and upheld by High Court – Matter remanded to High Court to frame question of law and decide the matter [S. 35D, 263 ]

    Allowing the appeal of the Revenue, the Court held that firstly, the High Court did not frame any substantial question of law as required under section 260A of the Act though it heard the appeal bipartite. In other words, the High Court did not dismiss the appeal in limine on the ground that it did not involve any substantial question of law. Secondly, the High Court dismissed the appeal without deciding any issue arising in the case saying that it was not necessary. Thirdly, the main issue involved in this appeal with regard to the applicability of section 35D of the Act to the assessee was not decided. The High Court should have framed the substantial question of law on the applicability of section 35D of the Act in addition to other questions and then answered them in accordance with law. Since the issue with regard to applicability of section 35D of the Act to the assessee was already pending consideration before the High Court in appeal, both the appeals should be decided together. (AY. 2007-08)

    CIT v. Yes Bank Ltd. (2019) 412 ITR 459 / 307 CTR 593/ 175 DTR 409 (SC)

    Editorial: Decision in CIT v. Yes Bank Ltd (ITA No. 599 of 2015 dated 1-8-2017 (Bom) (HC) is set aside.

11. S. 260A : Appeal – High Court – Without admitting the appeal and framing any question of law and dismissing it is not in conformity with the mandatory procedure – High Court is directed to hear the appeal following the mandatory procedure [S. 260A(2) (C), 260A(3)]

    Allowing the appeal of the Revenue the Court held that there is a distinction between questions proposed by the appellant for admission of the appeal (u/s. 260 A(2)(c)) and the questions framed by the Court (u/s. 260 A(3)). The High Court has to formulate substantial question of law and only thereafter hear the appeal on merits. If the High Court is of the view that the appeal does not involve any substantial question of law, it should record a categorical finding to that effect & dismiss the appeal in limine. However, it cannot, without admitting the appeal and framing any question of law, issue notice to the respondent, hear both parties on the questions urged by the appellant and dismiss it. This is not in conformity with the mandatory procedure prescribed in S.260A of the Act. (CA No. 3968 of 2019, dated 16-4-2019) (AY. 2008-09)

    PCIT v. A. A. Estate Pvt. Ltd (2019) 176 DTR 441/

    308 CTR 193 (SC), www.itatonline.org

12. S. 260A : Appeal – High Court – Defunct companies – The fact that the assessee company stands dissolved as a defunct company u/s. 560(5) of the Companies Act, 1956 does not mean that income- tax proceedings & appeals become infructuous. The liability against such companies has to be dealt with in accordance with s. 506(5) proviso (a) of the Companies Act and Chapter XV of the Income Tax Act which deal with “liability in special cases” and “discontinuance of business or dissolution”

    High Court dismissed the appeal of the Revenue on the ground that Court held that since the respondent Company stands dissolved as a result of the order passed by the Registrar of the Companies under Section 560(5) of the Companies Act, the appeal filed against such Company which stands dissolved does not survive for its consideration on merits. Court held that the fact that the assessee company stands dissolved as a defunct company u/s 560(5) of the Companies Act, 1956 does not mean that income-tax proceedings & appeals become infructuous. The liability against such companies has to be dealt with in accordance with s. 506(5) proviso (a) of the Companies Act and Chapter XV of the Income Tax Act which deal with “liability in special cases” and “discontinuance of business or dissolution”. Order of High Court is set aside and High Court directed to decide the appeal within six months. (CA No. 2922 of 2019, dated 12-3-2019)

    CIT v. Gopal Shri. Scrips Pvt. Ltd (2019) 175 DTR 412/ 307 CTR 596/ 262 Taxman 356(SC), www.itatonline.org
    

13. S. 260A : Appeal – High Court – Delay of 224 days – Ex-Chairman’s health ailment was sufficient cause – Delay was condoned and High Court is directed to hear the appeal on merits

    The assessee’s appeal was delayed by 224 days. High Court refused to condone the delay. On appeal to Supreme Court the Apex Court held that, Ex-Chairman’s health ailment was sufficient cause. Accordingly the delay was condoned and High Court is directed to hear the appeal on merits.

    Aakash Lavlesh Leisure (P.) Ltd. v. ITO (2019) 262 Taxman 2 (SC)

    Editorial: Aakash Lavlesh Leisure (P.) Ltd. v. ITO (2019) 103 taxmann.com 247/ 262 Taxman 4 (Bom) (HC)

14. S. 261 : Appeal – Supreme Court – Binding precedent – Merger – Interpretation – Review – Special Leave Petition was dismissed against High Court order in limine without giving any reasons, review petition filed by appellant, in High Court would be maintainable. [Art. 136, 141]

Allowing the appeal the Court held that, in case of an order refusing Special Leave to appeal, either a non-speaking order or a speaking one, the order of High Court, Tribunal or Authority below could not be said to be have merged with the order of the Supreme Court rejecting Special Leave Petition. Therefore review petition filed by appellant in High Court would be maintainable in a case where the Special Leave Petition was dismissed against a High Court order in limine without giving any reasons. However on an appeal having been preferred or a petition seeking leave to appeal having been converted into an appeal before Supreme Court, jurisdiction of High Court to entertain a review petition is lost as provided by sub-rule (1) of rule 1 of order 47 CPC. (CA No. 2432 of 2019, dated 1-3-2019).

Khoday Distilleries Ltd. v. Sri Mahadeshware Sahakara Sakkare Kharkhane Ltd. (LB) (2019) 262 Taxman 279/ 176 DTR 273/ 308 CTR 1 (SC), www.itatonline.org