Practical Knowledge With CAAJ

 The ITAT bench of Kolkata has quashed the penalty order u/s 271AAB  The ITAT bench of Kolkata has quashed the penalty order u/s 271AAB and held that there is no mention about various conditions provided u/s 271AAB of the Act and the ld. AO has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. Except mentioning the section 271AAB of the Act in the notice, it does not talk anything about the provisions of section 271AAB. Therefore, certainly such notice has a fatal error and technically is not a correct notice in the eyes of law because it intends to penalize an assessee without spelling about the charge against the assessee. (ITA No.2274/KOL/2019)

 The ITAT bench of Kolkata observed that there are large number of appeals pending The ITAT bench of Kolkata observed that there are large number of appeals pending on this issue before the Tribunal and out of them, 95% are not being prosecuted or are not being filed by any genuine business concern. Basically, those appeals are filed by the shell companies and here and there, requests are being made to delay disposal of these appeals. Faced with these situation, we have become little strict in compliance of the hearings, therefore, we decline the prayer of the assessee for adjournment and proceed to dispose the appeal ex-parte, qua the assessee. (ITA No. 130/Kol/2019) 

The ITAT bench of Delhi has held that the AO is not justified in taking drastic action The ITAT bench of Delhi has held that the AO is not justified in taking drastic action of rejection of books of account which are audited and are without any qualification solely on the basis of general remarks that photocopy of the bills has been produced instead of original bills. No specific instance has been provided in the order to appreciate as to how such delinquency on the part of the assessee has resulted in unreliability of books per se. The tribunal set aside the action of CIT(A) and directed the AO to reinstate the assessee's position in this matter. (I.T.A No.1155/Del/2020)

The High Court of Karnataka has set aside the assessee has submitted a detailed  The High Court of Karnataka has set aside the assessee has submitted a detailed response in reply of show cause notice along with relevant documents, the same has been neither considered nor appreciated by the AO and passed a non-speaking, unreasoned and laconic order without any application of mind and consequently being violative of principles of natural justice therefore the same deserves to be set aside. (Sri Srigandha Souhardha Credit Co-operative Ltd vs Union of India)

The ITAT bench of Bangalore has delated the addition where the sole basis  The ITAT bench of Bangalore has delated the addition where the sole basis for making addition by the A.O. u/s 69(B) of the Act for unexplained investment is based on seized document, but it cannot be said that this document belongs or pertains to / or any information contained therein relates to the assessee, therefore, the same does not come within the purview of definition of section 153C(1)(a) & (b) of the Act, because there is no name of assessee. (ITA No.997/Bang/2022)

  The Delhi High Court has upheld the tribunal order where it was held that The Delhi High Court has upheld the tribunal order where it was held that where shares were traded on stock exchange after paying securities transaction tax, and that money had been received through banking channels only demonstrated that they were not bogus transactions. (PCIT vs M/s Rajat Finvest, date of order 12.01.2023)

The Bombay High Court has held that the approval for the issuance of a notice The Bombay High Court has held that the approval for the issuance of a notice under Section 148 ought not to have been obtained from the Additional Commissioner of Income Tax but from the authority specifically mentioned under Section 151(ii) of the Income Tax Act i.e. it is subject to the approval of the Principal Chief Commissioner of Income-tax (PCIT). However, the department urged that since the Relaxation Act had extended the period of limitation, the authority that was otherwise supposed to grant approval in regard to cases falling within the ambit of Section 151(i) could have granted approval beyond the period of three years based upon the Relaxation Act. (MA Multi-Infra Development Pvt Ltd vs ACIT, date of order 09.01.2023)

The Delhi Bench of ITAT has held that the common area maintenance charges  The Delhi Bench of ITAT has held that the common area maintenance charges (CAM charges) would be subjected to 2% of TDS under Section 194C and not subject to 10% of TDS under section 194 I of the Income Tax Act 1961 where the rent payment to the licensor is independent of CAM charges payable thus the CAM charges cannot partake the character of rent. (ITA No. 1644/Del/2020).

The Ahmedabad bench of ITAT has held that the AO cannot make any addition The Ahmedabad bench of ITAT has held that the AO cannot make any addition on the ground that there is a downfall in the gross profit ratio declared by the assessee in the year under consideration in comparison to the earlier years without pointing out any defect in the amount of purchases, sales stock shown in the books of accounts. (ITA No. 126/Ahd/2022)

The Delhi High Court upheld the tribunal order The Delhi High Court upheld the tribunal order, which deleted the disallowance under section 40(a)(ia) of the Act on the ground that there is no dispute that the assessee deducted tax at source under section 192 of the Act. The Court is in agreement with the opinion of the ITAT that Section 195 of the Act has no application once the nature of payment is determined as salary and deduction has been made under section 192 of the Act. (PCIT vs Boeing India(P) Ltd.)

The Supreme Court has dismissed the revenue SLP The Supreme Court has dismissed the revenue SLP in case of M/s Ceat Ltd and held that where there was no allegation of suppression of material fact and entire basis for re-opening after expiry of four years from end of relevant assessment year was due to mistake of Assessing Officer that resulted in under assessment, reopening of assessment being on change of opinion was impermissible in law. (SLP 12643/2022)

The Supreme Court reversed that high court order  The Supreme Court reversed that high court order because the order passed by the AO under Section 142(2A) was never received by the AO. The Supreme Court stated that this fact was overlooked by the High Court on the ground that the order need not be passed, and only hearing is required. We do not agree with the said reasoning therefore the present appeal is disposed with a direction that the purported order directing special audit u/s 142(2A) of the Act will not be given effect to and will be treated as not passed, as it was never communicated to the assessee. (Rajiv Gandhi Proudyogiki Vishwavidyalaya vs Union of India, date of order 13.01.2023)

The Delhi ITAT bench has ruled that in order to claim  The Delhi ITAT bench has ruled that in order to claim capital gain exemption under Section 54, the builder must have begun construction, if not completed. However, because construction has not yet begun, the property in which part of the capital gains was invested has continued to be plot for all purposes and intent, and thus capital gain exemption under Section 54 is not allowable. (ITA No.1060/Del/2020)

The High Court of Calcutta has held that without disposing of the return of income The High Court of Calcutta has held that without disposing of the return of income filed by the assessee in response to the first notice, the assessing officer could not have issued a second notice for reopening of the assessment at a relevant point of time in view of the provision under Section 153(6)(i) of the Income Tax Act and the decision of the Division Bench of this Court in Coal India Ltd. (M/s Elite Pharmaceuticals and Anr. vs ITO Ward 22(2) Kolkata, Date of order 11.01.2023)

The assessee’s time cannot be taken for granted as the assessee appearing before the tax authorities The assessee’s time cannot be taken for granted as the assessee appearing before the tax authorities cannot be made to run around appearing again and again to justify the claim which anyway was allowable and has been allowed in the first round by the AO. The Authorities functioning under the Income Tax Act as Government Authorities are performing State functions for the benefit of the citizens. They no longer can continue to work with the mind set of administering the law applicable to colonials. This style of functioning may have been prevalent unquestioningly during colonial times under a foreign rule, however, it is no longer acceptable in the preset times.

The ITAT bench of Chandigarh has held that the Revisionary authority is duty   The ITAT bench of Chandigarh has held that the Revisionary authority is duty bound to look at the records available and necessarily needs to set out the error and the prejudice caused by the order sought to be set aside, the attitude that I have the power and I shall exercise it requiring the assessee again to support it claim cannot be accepted. (ITA-24/CHD/2021)

The High Court of Bombay has quashed reassessment order and held The High Court of Bombay has quashed reassessment order and held that between the date of the order of assessment sought to be reopened and the date of forming of opinion by the Assessing Officer, nothing new has happened. Neither is there any new information received nor is a reference made to any new material on record. The Assessing Officer simply has accorded a fresh consideration and come to a conclusion that the assessee ought to have claimed benefit of deduction under section 35ABB which would have resulted in reducing the allowance under section 32. In the absence of any tangible material, this case is nothing but a case of change of opinion and thus does not satisfy the jurisdictional foundation under section 147 of the Act. (Clear Media (India) Pvt Ltd vs DCIT)

The High Court of Punjab and Haryana has held that the electricity duty   The High Court of Punjab and Haryana has held that the electricity duty, not being a sum payable by the assessee as a primary liability by way of tax, duty, cess or fee, Section 43B is not attracted to the licensee/assessee in respect of electricity duty collected by it for being passed on the State Government. (PCIT vs Dakshin Haryana Bijli Vitran Nigam Ltd)

ITAT bench of Delhi has reversed the CIT(A) order   ITAT bench of Delhi has reversed the CIT(A) order and held that when the cash is found with an assessee, it is the duty of the assessee to prove the source of such cash by providing sufficient evidence to come to a conclusion to satisfy the source of such cash. In the absence of such proof, the Revenue Authorities are bound to make additions. Mere reflecting the unexplained cash in the books of accounts in absence of any supportive documents, cannot be ground for deletion of the addition. 

The Bombay High Court has held that orders, instructions or directions issued by the The Bombay High Court has held that orders, instructions or directions issued by the CBDT under Section 119 or under the Explanation to Section 279 (6) of the Income Tax Act, 1961, cannot put fetters on the power of income tax authorities under Section 279(2) to consider an application for compounding of offence at any time during the pendency of the proceeding and concluded that the condition specified in clause 7(ii) of the dated 14th June2019 Guidelines, is not a rule of limitation, but is only a guideline to the authorities while considering the application for compounding. It does not take away the jurisdiction of the authorities under Section 279(2) to consider the application for compounding on its own merits and decide the same. (Footcandles Film Pvt Ltd. & Anr. vs ITO– TDS & Ors)

The ITAT bench of Delhi has upheld the addition under Section 56(2) The ITAT bench of Delhi has upheld the addition under Section 56(2)(viib) where the valuer has considered the audited balance sheet as on 31.03.2014 which was approved and adopted in the Annual General meeting by the shareholders for the simple reason that it is practically impossible for any company to present the audited balance sheet of the F.Y. before the Annual General Meeting on the date of closing of the F.Y. i.e. 31st March. The certificate of the auditors is based on the statement and documents furnished by the company which is neither audited nor certified by the auditors. (ITA No. 6353/DEL/2018)

Delhi High Court has dismissed the revenue appeal  Delhi High Court has dismissed the revenue appeal where no fresh material was taken into account by the AO for making additions by invoking provision of section 153C and the sole basis for making the additions was the Seized Document whose genuineness itself was in doubt. (PCIT vs Vinita Chaurasia)

The Calcutta High Court upheld the ITAT's decision, ruling that  The Calcutta High Court upheld the ITAT's decision, ruling that the assessee is only rendering advisory services, it cannot be treated as included services under Article 12(4)(b) of the India-US Double Taxation Avoidance Agreement. As a result, consideration for advisory services does not amount to FTS and cannot be treated as Fees for Included Services under Article 12(4)(b) of the India-US Double Taxation Avoidance Agreement (DTAA). (CIT(IT&TP) vs the Timken Company)

The Impugned Judgment and order passed by the High Court is hereby confirmed. The Supreme Court has held that the assessee – persons other than searched persons shall be liable to pay the interest on late filing of the return under Section 158BC even in absence of a notice under Section 158BC of the Income Tax Act and even for the period prior to 01.06.1999. To that extent, the impugned judgment and order passed by the High Court is hereby confirmed. (K.L. Swamy vs CIT)

  The ITAT bench of Mumbai has allowed the claim for deduction under section 11(1)(a) The ITAT bench of Mumbai has allowed the claim for deduction under section 11(1)(a) of the Act where the assessee has filed audit report in Form No. 10B alongwith the return of income filed on 30.3.2017 and noted that the requirement of filing audit report before the date prescribed in sec.44AB has been brought into the statute only w.e.f 1.4.2020, i.e., from AY 2020-21. Accordingly, in the assessment year under consideration, viz., AY 2015-16, the requirement under the Act was to file audit report along with the return of income. Therefore, the assessee has complied with the conditions prescribed in sec. 12(1)(b) by furnishing audit report along with the return of income. ( I.T.A. No. 1637/Mum/2022)

ITAT bench of Mumbai has held in case of TATA Industries Ltd ITAT bench of Mumbai has held in case of TATA Industries Ltd. that there is no restriction or bar in set off of foreign dividend of income from the current year loss while computing the total income by following the decision of the Coordinate Bench in the case of Tata Motors Ltd. vs. DCIT (ITA No.217/Mum/2020)

Gujrat High Court has held that that once the identity Gujrat High Court has held that that once the identity, genuineness of transactions, and creditworthiness have been established, no additions can be made by observed that the initial burden, even if not discharged at the level of the assessing officer, can be discharged by the production of documents before the CIT (Appeals), where two remand reports have been called for. Every transaction has been made through a banking channel, there is no reason to also question the creditworthiness. In this case, the assessee contended that the monies were received and subsequently repaid through account payee cheques or bank transfers, and they had been recorded in the books of accounts. The lenders also confirmed the transactions, and thus, the company discharged the onus regarding the said deposits. (PCIT Vs. Neotech Education Foundation)

The High Court of Delhi has held that where reopening is sought of an assessment The High Court of Delhi has held that where reopening is sought of an assessment in a situation where the initial return is processed under section 143 (1) of the Act, the AO can form reasons to believe that income has escaped assessment by examining the very return and/or the documents accompanying the return. It is not necessary in such a case for the AO to come across some fresh tangible material to form 'reasons to believe' that income has escaped assessment because the order passed under section 143(1) of the Act is not an assessment for the purposes of Section 147 of the Act. (Ernst & Young U.S. LLP v. ACIT(IT))

ITAT bench of ITAT has held that the power of the State Government  ITAT bench of ITAT has held that the power of the State Government to levy tax on the sale and purchase of liquor and the power to levy fees are two different powers and are derived from two different entries in the State list.  The fees levied under the power granted under Entry 69 cannot encompass tax levied by Entry 54

ITAT bench of Kolkata has held that the law is very well settled   ITAT bench of Kolkata has held that the law is very well settled that in respect of concluded assessments, the earlier assessment completed should not be disturbed in the search assessments without existence of any incriminating material relatable to such assessment year. Reliance in this regard is placed on the decision of the Hon’ble Jurisdictional High Court in the case of Continental Warehousing Corporation reported in 374 ITR 645. There is yet another decision which was rendered by the Hon’ble Calcutta High Court in the context of section 153C proceedings in the case of CIT vs. Veer Prabhu Marketing Ltd., reported in 73 taxmann.com 149 laying down the similar proposition.  

The ITAT bench of Pune has held that when it has been categorically established that The ITAT bench of Pune has held that when it has been categorically established that, the amount of bogus purchases is debited to P&L by fictitious tax invoices and the respondent assessee failed to establish the consumption of such goods in the execution of civil contract by adducing such stock movement records to the satisfaction of Ld. AO., then taxing such bogus purchases GP rate of goes against the principles of taxation embedded in chapter VI of the Act and against the ratio laid down in “N K Proteins Ltd” and “PCIT Vs Pinaki D Pinani” , for the reason, we are of the considered view that, the Ld. AO was right in making 100% disallowance towards bogus / hawala purchases.

ITAT bench of Ahmedabad has directed the AO to allow the exemption under section 11 ITAT bench of Ahmedabad has directed the AO to allow the exemption under section 11 of the Act where audit report in Form 10B was not furnished along with the return of income. It was noted by the tribunal that there was lack of guidance on the part of the assessee by the tax professionals. Thus, in the event of any disallowance of the benefits available to the assessee, it will cause undue hardship to it in the given facts and circumstances. 

ITAT bench of Ahmedabad has set aside the assessment order  ITAT bench of Ahmedabad has set aside the assessment order where the assessee was not confronted by the Assessing Officer related to the information received from National Stock Exchange despite assessee’s request to give sufficient time for responding the same. 

The ITAT bench of Mumbai has held in case of Tata Education   The ITAT bench of Mumbai has held in case of Tata Education and Development Trust that the Ld. CIT(E) lacked jurisdiction to impose any conditions on his (other than what is stipulated in law) while granting the approval u/s 80G of the Act because the second proviso to section 80G(5) only grants the Commissioner the power to grant registration. And no power to impose any conditions has been conferred on the Commissioner. 

The ITAT bench in Mumbai has quashed the revision order The ITAT bench in Mumbai has quashed the revision order, ruling that when the AO has taken one of several possible views, the PCIT is barred from taking a different view by relied on the decision of Supreme Court in case of Malabar Industrial Company wherein it is held that, if the AO has taken one of the possible views, then the assessment order cannot be considered to be prejudicial to the interests of revenue merely for the reason that the Ld PCIT has got different view on the very same matter. 

The Madras High Court reversed the order passed by Tribuna The Madras High Court reversed the order passed by Tribunal wherein the Tribunal has held that that the DVAC's report cannot be looked into by the Commissioner of Income Tax for the purpose of revision under Section 263 of the Income Tax Act, 1961 as it is not a proceeding under the Income Tax Act, 1961. The High Court has held that the power was rightly exercised by the Commissioner of Income Tax while invoking Section 263 of the Income Tax Act, 1961. (CIT Central-II vs N. Sasikala, Date of order 21.12.2023)

The Bombay High Court on Monday issued a notice The Bombay High Court on Monday issued a notice to Attorney General of India in respect to the retrospective application of the Black Money Act in a petition filed by Anil Ambani, Chairman of Reliance ADA Group. Learned senior counsel of the petitioner has submitted that the Act came into force in the year 2015. The transactions alleged are of the assessment year 2006 and 2010-11. The criminal provisions cannot have retrospective effect. Reliance is placed on Article 20 of the Constitution of India. (Anil Dhirajlal Ambani v. Union of India)

Red Chilli International Sales vs ITO The Supreme Court has set aside an order of the Punjab and Haryana High Court, which held that the writ petition would be unsustainable in light of the alternative remedy. The Supreme Court held that the provisions of reopening under the Income Tax Act, 1961 have undergone an amendment by the Finance Act, 2021, and consequently the matter would require a deeper and in-depth consideration keeping in view the earlier case law. Accordingly, we set aside the observations made by the High Court and clarify that this issue would be examined in depth by the High Court if and when it arise for consideration. (Red Chilli International Sales vs ITO)

The Calcutta High Court has held in case of Britannia Industries Limited The Calcutta High Court has held in case of Britannia Industries Limited that the tribunal which is the last fact-finding authority has elaborately considered the factual position and granted relief to the assessee. Unless and until the order passed by the learned tribunal suffers from any perversity or ignores any vital fact in an appeal under Section 260A of the Act, the high court not expected to interfere in such an order.

The Kolkata bench of the ITAT upheld the Ld. PCIT’s revisional order u/s 263 The Kolkata bench of the ITAT upheld the Ld. PCIT’s revisional order u/s 263 when the Assessing Officer failed to enquire about bogus Transactions of earning long-term capital gain from penny stock companies after placing reliance on the judgment of Hon’ble Jurisdictional High Court in the case of Swati Bajaj & Others (2022) 139  taxmann.com  352(Cal.) pronounced on 14.06.2022.

The Delhi High Court has held that the leasehold rights held   The Delhi High Court has held that the leasehold rights held by the Assessee in the plot was a Capital Asset and that the compensation received by the Assessee from the Government of Goa on the cancellation of the plot was a capital receipt and not a revenue receipt. It is trite law that if an agreement for transfer of rights in an immovable property is not performed by the transferor, the transferee is entitled for compensation as he/she is deprived of the price of escalation. Therefore, the character of payment received as compensation by the transferee bears the character of capital receipt. The payment of interest in the facts of the present case is compensatory in nature and therefore, does not bear the character of revenue receipt. (PCIT vs Pawa Infrastructure (P) Ltd.)

The Rajkot Bench of the ITAT has held that the property transferred   The Rajkot Bench of the ITAT has held that the property transferred by the assessee to his mother for consideration of Rs. 5 lakh is liable to be brought under the ambit of capital gain and not to be considered as gift. However, the question arise for determination of sales consideration. As the AO has taken consideration as per section 50C of the Act whereas the AR before us has challenged the value adopted by the AO and subsequently sustained by the learned CIT(A). In the interest of justice and fair play, we set aside the issue to the file of the AO to refer the matter to the DVO to determine the value of the property in pursuance to the provisions of section 50C of the Act.

The Delhi Bench of the ITAT allowed the expenses incurred during The Delhi Bench of the ITAT allowed the expenses incurred during the transfer of shares by observing that the expenses incurred by the assessee are allowable transfer expenses under Section 48 of the Income Tax Act, and that both lower authorities made an error in disallowing the expenses incurred by the assessee by relying on the decision the Hon’ble jurisdictional Delhi High Court in the case of Kausaiya Devi Vs CIT ITA No 600/2004 had held that once the amount is spent and paid, the authorities cannot decide commercial expediency by putting themselves in the arm chair of the assessee to examine and consider whether they would have or the assessee should have incurred the said expenditure including the quantum having regard to the circumstances. (Pallav Pandey vs ACIT)

The Gujarat High Court has quashed the income tax assessment order The Gujarat High Court has quashed the income tax assessment order on the grounds of a violation of the principle of natural justice without affording an opportunity of personal hearing by not following the prescribed procedure laid down as per the provisions of section 144B of the Act, 1961 for Faceless assessment by the National Faceless Assessment Center and stated that the department will be at liberty to proceed with assessment under the provisions of Section 144B of the Income Tax Act, 1961, as permissible under the law, after issuance of a show cause notice and draft assessment order so as to provide an opportunity of hearing to the petitioner. In this case, the department issued the final assessment order without allowing the petitioner to be heard on the basis of new material that was never mentioned in the draught assessment order or any of the earlier notices. 

The finance ministry is considering a proposal to shift the tax liability The finance ministry is considering a proposal to shift the tax liability on buyback of shares from companies to individual shareholders who participate in the share repurchase process. The idea is to bring taxation of share buybacks similar to the way dividend income is taxed at the hands of the shareholders. Also, the shift in tax liability will do away with the current incidence of double taxation of buyback proceeds, with shareholders also paying capital gain taxes on the gross proceeds received.

The ITAT bench of Ahmedabad has deleted the penalty u/s 271(1)(c) The ITAT bench of Ahmedabad has deleted the penalty u/s 271(1)(c) of the Act and held that the assessee cannot be liable for penalty under Section 271(1)(c) of the Act when an addition is being made with the help of the deeming provision of Section 50C of the Act. (ITA No. 348/Ahd/2021)

  High Court in exercise of powers conferred under Article 226 of the Constitution of India The High Court of Gujrat has held that once an efficacious alternative remedy by way of statutory appeal as provided under the special enactment and the assessee having failed to avail that statutory efficacious remedy, the High Court in exercise of powers conferred under Article 226 of the Constitution of India, cannot extend the statutory period of appeal which has otherwise expired, as the Supreme Court has held. (Nidhi Corporation vs ITO)

Muthoot Leasing and Finance Ltd. vs CIT The Supreme Court has held that the high court cannot interfere with finding of ITAT without frame a specific substantial question of law. Findings of fact generally recorded by the ITAT are treated as conclusive. The High Court can interfere with the findings of fact while deciding a substantial question of law when the findings are not supported by the material on record, so as to be treated as perverse. (Muthoot Leasing and Finance Ltd. vs CIT)

The ITAT bench of Hyderabad has held that the instructions/circulars The ITAT bench of Hyderabad has held that the instructions/circulars issued by the Board and are binding on the revenue authorities, therefore the tribunal deem it proper to restore the issue to the file of ld. CIT(A)/NFAC with the direction to adjudicate the issue afresh in the light of the circulars/instructions issued by the CBDT clarifying the time allowed for filing of return of income subsequent to the insertion of clause(ba) in sub-section (1) of section 12A of the Act.

  The Mumbai bench of ITAT has held that ICAI as an expert body of accountants The Mumbai bench of ITAT has held that ICAI as an expert body of accountants and the Guidelines for calculating turnover in transactions related to future and options can be relied upon in the absence of any statutory provision for computation of turnover in such cases.