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0 15/12/.2016

RECENT DIRECT TAXES JUDGEMENTS. A. OTHERS.

1. 14A. Disallowance of Expenditure: Exempt Income.

Punjab State Co.op. Milk Producers Federation Ltd V/s CIT. (2016) 238 Taxman 207 (P & H) High Court. Disallowance of Expenditure Exempt Income- Provision is applicable to Income claimed as deduction u/s 80P2 (d)

2. Se 80P:- Co.Operative Societies. Kerala State Co. Operative Agricultural & Rural development Ltd. V/s CIT. (2016) 383 ITR 610 (Kerala HC) Assessee fell within the term ‘Co-operative Bank’ and was not entitled for deduction.

3. 14A Disallowance & Exempt Income. K. Ratanchand and Co V/s ITO (2016) 45 ITR (Tribunal) 608 Ahmedabad. Disallowance of Expenditure- Exempt Income- Disallowance can not exceed exempt dividend Income.

4. Income from house property- Annual Value. Vishwanath Acharya V/s ACIT (2016) 157 ITD 1032 or

45 ITR 554 (Mumbai) Tribunal. Annual Value- Assessee did not disclose Income from house property in respect of his Six Immovable properties- AO could not make addition to assessee’s Income merely on basis of notional rent on cost of properties without computing Income in accordance with provisions of Se.22 & 23.

5. Income from Other Sources:- Chargeability- Se. 2 (31) 56 (2) (vi) Mridu Hari Dalmia Parivar Trust V/s A.O (2016) 139 DTR (Del) (Tribunal) 143. Any Sum exceeding Rs.50,000/- can fall within the ambit of S.56 (2) (vi) only if it is

received by an Individual or HUF, amount of Rs.1,60 Crores received without consideration by the assessee- trust which is assessed as are AOP can not be included in its total Income under Se,56 (2)(vi).

6. Bank Interest Deduction: Income of Co-operative Societies. State Bank of India (SBI) V/s CIT (2016) 72 taxmann.com 64 (Gujarat) Bank Interest Incase of a society engaged in providing credit facilities to its members

Income from Investments made in banks is not deductible under Section 80P.

7 Capital Assets:- ITO V/s. Damayanti Chunilal Goda ITA No 289/ Mum/ 2015, dt. 24/8/2016 (itatonline.inc)

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2(14) (iii) Capital Assets: Sale of Agricultural Land- Exempt from tax- even if purpose of the buyer is non- agricultural.

8 14A Disallowances. CIT V/s. Max India Ltd. (2016) 141 DTR 145 (P & H) Se.14A. Apportionment of Interest- presumption as regards the utilization of Interest-

free funds and borrowed funds in a fixed pool ought to be in favour of the assessee- Tribunal was justified in holding that no expen ses is attributabvle to the exempted Income as the Revenue had failed to establish a direct nexus between the expenses incurred and the Income earned.

9 Capital Assets: Agricultural land: Absence of Agricultural activities. ITO V/s Aboobacker ITAT Chennai D.Bench.

(2016) 141 DTR (Chennai) Tribunal 78. Assessee having adduced no evidence of spending human labour for cultivating land which is located in fast developing residential area of Chennai and has been sold at an exorbitant price to a company incorporated with the objects. Interalioa to develop housing projects. It cannot be treated as agricultural land notwithstanding the description of the land as agricultural land in the revenue records and the certificate issued by the president of the village panchayat that the land is away from Municipality.

10. Se.14A: Disallowance of Expenditure related to Exempt Income:- CIT V/s Max India Ltd (No2) (2016) 388 ITR 81 (P & H) Presumption regarding expenditure- finding that no expenditure had been incurred in

earning exempt Income disallowance under Se14A not justified. 11. Income from House property. Joint name. who is real owner(?) Se 24 (1) (vi). Ankit

Mittal V/s ITO (2016) 51 ITR Tribunal 305 Delhi Tribunal. Owner- Meaning of House Property purchased in Joint names of assessee and his

wife- Entire Investment made by assessee for purchasing property- Nothing to suggest wife of assessee made any contribution towards purchase of hour property or Income from that house assessable in her hands- Income from Property should be taxed in hands of read owner.

12 Capital Gain – Agricultural land: Adventures in nature of trade vis-à-vis sale of

agricultural land:- Asst CIT V/s Mansi Finance Chennai Ltd. (2016) 141 DTR (Chennai Tribunal) 305 (194) Land in question recorded as agricultural land. Income there from returned as

agricultural Income land not subjected to conversion into non agricultural land- and facts on record not showing that land was purchased by assessee with intention of re-sale- Sale of land by assessee at profit could not b e treated as adventure in the nature of trade.

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13. Agricultural Land:- CIT Coimbatore V/s K.R.N. Prabhakaran (HUF) (2016) 73 Taxmann.com 305 (Madras) Where Survey Department of State Government and Tahsildar of relevant zone had

consistently certified that land sold by assessee was agricultural land situated beyond 8 Kms from Municipal limits, Assessing Officer could not have relied on report of Investigation wing to hold otherwise and to had assessee liable to capital gain tax.

(B) CHARITABLE TRUST. 1. Charitable Purpose:- Income tax officer V/s Sri Thyaga Brahma Gana Sabha (2016) 50 ITR (Tribunal) (S.N) 64 (Chennai) Definition- Exemption- change of law- disqualification.

Where objects of general Public utility have colour of trade. Commerce and Business- Society formed for promotion of Fine Arts Finding of Commissioner that apart activities of assessee were dominant activities confirming to objects and second subservient activities incidental to dominant activities- Society not to be denied exemption under amended provision IT Act 2 (15) ,11.

2. Auditorium Hall Income- Whether Business Income (?) Sugana Charitable Trust V/s ITO Ward I Combibatre (2016) 159 ITD 838. Where there was no connection between activity of commercial running of auditorium

hall by a trust and its object, mere that while or some part of Income from running of auditorium hall was used for charitable purposes would not render business itself being considered as incidental to attainment of object of assessee-trust.

3. Registration of Trust whether formal deed is must (?) Tsarpha Labrang V/s Director of I.T (Exemptions) Delhi. (2016) 159 ITD 848 (Delhi Tribunal) Execution of a formal deed of trust is not necessary for grant of registration under

Section 12AA/12A.

4. S..12A. .Corpus Donation: Whether taxable (?) Chandra Prabhu Jain V/s. ACIT ITA No 230/Mum/2016 dated 12/8/2016 (Mumbai )

Tribunal- source wwwitat.n i.e. 12A. If trust is not registered under 12A. Corpus donation will not be taxable (is Capital Receipts.)

5 Section 2 (15)

New Okhla Industrial Development Authority V/s CIT (2016) 141 DTR (Delhi Tribunal) 89 (184)

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Assessee- authority having been created under the provisions of U.P Industrial Area Development Act 1976 for the purpose of development of Infrastructure of a specified Industrial area with the predominant purpose of creating and developing facility for development of Industries in the State and its legal existence being akin to a municipal Corporation , its activity is of the nature of General Public Utility activities of acquiring land and selling developed properties being incidental to the objects of the assessee, there is no prime object to earn profit and, therefore proviso to Se. 2 (15) cannot be accepted to deny registration under S.12A assessee- authority is entitled to registration under Se.12A.

(C ) BUSINESS INCOME & DEDUCTIONS. 1. Business Loss:- Write off

CIT V/s ITC Ltd (2016) 237 Taxman 533 (Cal H C) Write off of due from Government authorities. Held to be allowable as business Loss:

2. Revenue Expenditure incurred in Particular Year- When to be allowed (?) – Treatment in Books of Accounts. DIT (IT) V/s Credit Lyonnais (2016) 238 Taxman 157 () Bombay High Court). Revenue Expenditure Incurred in particular year had to be allowed in the year of Expenditure- Irrespective whether the same is amortised in the books of accounts- Revenue could not deny claim of the entire Expenditure as deduction.

3. Fines and Penalties:- Shyam Sel Ltd V/s. Dy CIT (2016) 386 ITR 492 (Cal) Penalty charges paid to pollution control Board for failure to install pollution control equipment at factory premises. Expenditure incurred for compensating Damage caused to environment- Payment according to Polluter Pays” Principle- Compensation for purpose of business- Expenditure allowable-IT Act Se.37.

4. Business Income or Income from House Property. Rayala Corporation (P) Ltd V/s Asst. CIT (2016) 386 ITR 500 (SC) Rent received from property- finding that assessee had discontinued all other business activities and only carried on leasing of property- Business of assessee to lease property and earn Rent. Rent taxable as Income from business- not house property-SS22 & 28.

5. Capital or Revenue Expenditure:- Repairs and maintenance of Rented Premises:- RPG Enterprises Ltd V/s Dy CIT 92016) 386 ITR 401 (Bombay HC) Apportionment of Expenditure- Depreciation to extent apportioned as Capital Expenditure- Renovation resulting in Extra accommodation- enduring benefit to assessee. Capital Expenditure I.T Act Se.32 & 37.

6. Income Accrual:- Lease of factory to group company. CIT V/s Shree Hanuman Sagar and Industries Ltd.

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(2016) 386 ITR 218 (Calcutta High Court) Reduction in lease rent by Resolution of Board of directors on account of Financial inability- Commercial Expediency Bonafides of transaction not disputed.

7. Business Expenditure year in which allowable (?) (2016) 386 ITR 267 (Rajsthan HC) Assessee a State Government Undertaking- Expenses pertaining to earlier Assessment years. Liability Crystalising during relevant assessment year on approval I.T Act 1961.

8. Business Income:- Remission or Cessation of Trading Liability. Madan Mohla V/s Income tax officer (2016) 50 ITR (Tribunal) 204 (Mumbai) Remission of trading liability condition precedent for application of provision- assessee must get some benefit in real terms by way of remission or cessation- decision to pay or not to pay a liability can be taken by businessman alone expiry of period of limitation prescribed under limitation act would not extinguish Debt liabilities acknowledged in books of Account – No presumption that liability ceased to exist that too merely on basis of their age I.T Act 1961 Se 41 (1)

9. Depreciation Carry forward and Set off. Asst. CIT V/s J.K. tyre and Industries Ltd. (2016) 50 ITR (Tribunal) S.N.) 78 Kolkata. Change of law with effect from April1, 1997 and with effect from April, 1, 2002, effect- unabsorbed Depreciation relating to assessment year 1994-95 to 1997-98 available for set off in A.Y. 2008-09 I.T Act 1961.

10. Setup of Business. Pipe brindge Investment Capital Market (P) Ltd V/s ITO (2016) 50 ITR (Tribunal) (S N) 81 (Mumbai) Business Expenditure, Business when set up- Setting up and Commencement- distinction- Non banking financial Company. Date on which Registered with Reserve Bank of India is date on which assessee legally and commercially competent to do business , Business set up on that date.

11. Depreciation-Allowance/ Rate of Effluent Treatment Plant:- Anushakti Chemical and Drugs Ltd. V/s Addln. CIT 10 (3) Mumbai (2016) 71 taxmann.com 320 (Mumbai Tribunal) Effluent Treatment Plant is a water pollution control equipment eligible for 100 percent

depreciation. 12. Preliminary Expenses. Debenture issue Expenses:- Convertible Debenture: Gruh Finance Ltd. V/s Asst. CIT Circle 4 Ahmedabad. (2016) 72 taxmann.com 48 (Ahmedabad Tribunal)

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Expenditure on issue of convertible debenture, which is directly related to expansion of Capital base of company, is to be treated as Capital expenditure not eligible for deduction under Section 35D.

13. Stock in trade. Se.14A whether Applicable (?) Dy CIT V/s Teelok Advisory Services (P) Ltd. (2016) 159 ITD 991. Provisions of Section 14A read with rule 8D could be invoked to make a disallowance on

account of expenditure incurred in relation to exempt Income in form of dividend by assessee on shares held as stock in trade.

14. Interest on borrowed Capital and disallowance of Interest. CIT V/s. Smt Satishbala Malhotra and Others (2016) 387 ITR 403 (P & H) Interest on borrowed Capital- Interest free advances to group concerns made on

account of commercial Expediency- Balance sheet showing availability of sufficient own funds to make interest free Loan Interest not to be disallowed. Se.36 (1) (iii).

15 Best Judgement Assessment. Gross Profit determination. CIT V/s. Smt. Satish Bala Malhotra and Others [ Mp s] (2016) 387 ITR 406 (P & H) Determination of G.P a question of fact: Publisher adoption of gross profit rate of

assessee at 41.50 percentage by A.O by comparing with another publishing Co determination of gross Profit rate of assessee at 25.34 percent based on difference in cost of production of higher quality books by assessee accepted by CIT (A) and Tribunal- concurrent finding of facts- same is not perverse or absurd- No substantial question of law- Se 144, 145 (3)

16 Business Expenditure No production of documents due to fire. Dy CIT V/s Rawatsons Engineers (P) Ltd.

(2016) 51 ITR Tribunal (SN) 67 (Kolkata) Failure by assessee to produce supporting documents for various balances written off as a result of fire in office Building- Reasonable cause- No defect in Audited Financial statement of Assessee. No discrepancy in Books of Account of assessee with regard to interest and contract Receipt. Disallowance not proper.

17. Business Income vis-à-vis Income from House Property. Agya Ram V/s CIT (2016) 141 DTR Page 133 (Delhi H.C) Income derived by licensing part of factory premises- Assessee having consistently

shown the Licence fee as business Income from A.Y. 1982-83 onwards. Which has been accepted as such and the CIT (A) having elaborately discussed the clauses of the licence deed to come to the conclusion that what was received by the assessee was in fact licence fee and not rent, same is assessable as business income and not a Income from House Property.

18. Amount received in terms of settlement agreement for not using a trade name:

whether Revenue Recipt.

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Se.28 (va) Orient Blackswan (P) Ltd V/s Asst. CIT

(2016) 141 DTR Hyderabad (Tribunal) 65 (183) Compensation received by assessee under a negative Covenant for impairment of right to use the word “Longman” in its trade name is in the nature of Capital Receipt. Since the trade mark itself has ceased to exist by virtue of the order of the court. The impugned payment can not be said to be a payment for not sharing the trade mark and therefore it cannot be brought to tax as business Income under Se.28 (va). (A.Y. 2008-09 to 2010-11)

19. Business Expenditure. Bonus Dispute as to quantum of Bonus . Shushan Chemicals and Drugs Ltd. V/s CIT (2016) 388 ITR 1 (SC) Dispute as to quantum of Bonus leading to labour unrest and workers refusing to

accept Bonus offered Payment made to Trust- Dispute settled and payments of Bonus made to workers before due date. Disallowance under Se. 43B and 50A (9) not attracted. Deduction to be allowed.

20. Commencement of Business V/s Setting up of Business. Pine Bridge Investments Capital India (P) Ltd. V/s ITO 6 (1) (4) Mumbai (2016) 160

ITD 566. Business may be commenced subsequently but for purpose of allowing expenses, it

has to be seen when business can be said to be ‘Set up” fro [Non banking Financial Company] NBFC date of set up of its business shall be date on which it received registration certificate from R.B.I.

21. Applicability of Indian Medical Council (Professional conduct Etiquette and Ethics)

Regulations 2002 regn. 6.4.1) Asst CIT V/s Liva Health Care Ltd (2016) 141 DTR (*Mumbai) (Tribunal) 273. If the free samples of Pharmaceutical Products are distributed to doctors/ Physicians

after the products are introduced in the market and its uses are established, it would be a measures of sales promotion which would be hit by regulation 6.4.1 of the I.M.C (professional CE& E) Regulations 2002 and therefore, the Expenses cannot be allowed as deduction in views of Explanations Se.37 (1).

D. CAPITAL GAINS. 1. Short term Capital Asset or Long Term Capital Asset. Bindiya H. Malkani V/s CIT (Bombay H.C) (2016) 386 ITR 87 Bombay H.C An agreement to purchase property merely creates a right to seek specific performance.

The Asset can not be considered to be ‘held’ from the date of the agreement. So as to constitute long term Capital Gain.

2. Se.2 (42A) Short term Capital Assets V/s Long Term Capital Asset. Nitul B. Shah V/s. ITO (2016) 158 ITD 830 (Mumbai ) Tribunal.

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Immovable Property- Period of holding- Assessee received Immovable property belonging to his grandmother, by way of family settlement, to determine nature of Capital gain arising from sale of said property the period of holding would commence from date when he became owner of property b y virtue of family arrangement and not from date when his grand mother expired (Se 45 & 54EC).

3. 50C: Capital Gains:- Full value of consideration . Mohd. Imran Baig and others V/s ITO (2016) 130 DTR 33,. Hydrabad Tribunal. Stamp duty valuation, The Stamp duty value on the date of agreement and not date of

sale date has to be taken. 4. Sale of Property: 50C. Smt. Sitabai Khetan V/s. Income tax Officer. (2016) 50 ITR (Tribunal) 196 Jaipur.

Sale of Property- difference between valuation adopted by stamp valuation authority- and that declared by assessee less than 10 percent: To be ignored A.O to adopt value declared by assessee Income tax Act 1961 Se.50C.

5. Capital Gain- 50 C. Lalit Mohan Gupta V/s ITO (2016) 50 ITR Tribunal S.N 36 Delhi. Capital Gain- Full value of consideration- ownership Rights in property vesting in

purchaser under agreement to sell- Execution of Sale deed merely a formality- Full value of consideration at time of agreement to sell is applicable. Value adopted by stamp valuation. Authority as on date of sale deed not applicable.

6. 54F Deduction. Rajeev B. Shah V/s ITO 19 (2) (1) Mumbai (2016) 159 ITD 964. Mumbai Tribunal. Section 54F relief can not be denied assessee when he has invested entire sale

consideration in residential property but is unable to get possession of flat, which is under construction, due to fault of builder

7. Sum received from developer due to hardship caused on redevelopment of flat- whether

Capital Receipts(?) or Revenue Receipts (?) Jitendra Kumar Soneja V/s ITO 6 (3) (3) Mumbai. (2016) 72 Taxmann.com 318 (Mumbai Tribunal) 29.8.2016. The Corpus fund was received by a Member of Co-operative housing Society on

redevelopment- It was outside the ambit of Income under Section 2 (24) and thus not taxable as a Revenue Receipt. The Corpus Fund received by the member of Co-.operative Society ends up reducing the cost of acquisition of the Asset, i.e flat and therefore, the same will be taken into account while computing Capital gain on transfer.

8. Benefit of 54:- When Purchase is to be determined i.e. Date of allotment letter/ date of

Agreement or date of possession(?)of the flat. Bastimal K. Jain V/s ITO 15 (1) (2) ITA No 2895/Mum/2014 A.Y. 2010-11. Date of order 8/6/2016.

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We are of the view that the Assessee’s claim of deduction u/s 54 of the Act is to be

recknowed from the date of handing over of the possession of the flat by the builder to the Assessee i.e. 11/09/2009, and if we take that date the assessee is entitled to deduction u/s 54 of the Act because the assessee has sold his residential flat on 24/02/2010. We allow the Assessee’s claim and order accordingly.

9. Whether sale of development Right of Land attract Se.50C(?) The ACIT 25 (3) V/s M/s. Dattani Development. ITA 5075/Mum/2010 A.Y. 2007-08 D. Bench. Date of order 27/07/2016. Held by the Tribunal Se.50C of the Act is clearly applicable even to the sale of

development rights in the land by following Arif Akhtar Hussain V/s ITO 45 SOT 257 ITAT Mumbai and other case laws.

10. Long Term Capital Gain & Addition u/s 68 of I.T Act 1961. ITO 17 (1) (2) V/s Shri Madan S. Kothari. ITA 2456/Mum/2013 A.Y. 2005-06. Date of order 12/8/2016. When purchase of shares are not doubted and share sold were kept in Dmat Form

Payment of sale consideration received in cheque and the Secuity transaction tax paid on such sale of shares in the Statement MUKESH CHOKSHI confirmed the transaction of assessee as genuine.

Addition made u/s 68 Rs.43,9,235/- was rightly deleted by the CIT (A) and same were confirmed by the Income tax Tribunal.

11. How to Calculate Long term Capital gain.

(a) From the date of Letter of Allotment. (b) From the date of Possession of Flat(?) RICHA BAGRODIA V/s Dy CIT 12 (3) Mumbai. ITA 3601/M/2012 A.Y. 2008-09. The Assessee was allotted flat on 11/04/2003 (F.Y. 2003-04) The Sale of Property 14/10/2007. The Possession of the flat was delivered letter on S.Y. 31/3/2005) following the Mrs Madhu Kaul V/s CIT ITA No 89 of 1999 dated 17/01/20914 held that the mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter and following Gujarat H.C. CIT V/s. Anilaben Shah (2003) 262 ITR 6571 (Gujarat). The Member ITAT decided case in favour of the assessee.

13. Joint Development Agreement: Coromandel Cables (P) Ltd. V/s. Assistant Commissioner of Income-tax Company

Circle-1 (3), Chennai [2016) 71 taxmann.com 346 (Chennai- Trib). Where developer was not ‘willing to perform’ its contractual obligations under JDA in

relevant assessment year in which JDA was entered into and no actual construction had taken place at impugned property in that year, impugned JDA could not be said to be a

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‘contract of nature referred to in section 53A of Transfer of Property Act’ and, accordingly provisions of section 2 (47) (v) could not be invoked.

CIT V/s V.S. Dempo Company Ltd. (2016) 387 ITR 354 (S.C) 14. Depreciable Asset: Investment of gain from sale of Long Term Capital Asset in

specified asset deeming fiction treating gains from transfer as gains from transfer of (deemed) short term Asset- restricted to mode of computation of gains does not affect entitlement to exemption. Where asset held for more than thirty six months. Se 2 (29B) 50.54E.

15. Capital Gains Exemption: Hamayan Sales man Merchant V/s Chief CIT (2016) 387 ITR 421 (Bombay) Sale of Long-term capital Asset and Investment of net consideration in residential

House Exemption u/s 54F. Law applicable. Effect of amendment w.e.f 1/4/1998- Net consideration must be appropriated where purchase was earlier or utilized where purchase is after sale and any balance should be deposited in specified Bank – Portion of net consideration neither utilized nor invested as required- Exemption not available for such portion I.T Act 1961 Se.54F.

16. Capital Gain . Possession- Registration of documents Dharmidevi Kanaiyalal Suthar V/s ITO (2016) 51 ITR (Tribunal) (SN 55) Ahmedabad Se.48. 50C. 52. Capital Gains- Long Term Capital Gains- transfer when complete. Full Value of consideration- Agreement to sell property entered into 2007 and

consideration received and possession handed over. Transfer registered in 2010 gains taxable in 2011-12 ( as long term gain (i.e. Sale of same property.) Right to have sale deed Executed in favour of vendee in 2007 to be applied for determing value of property for purpose of computing Capital gains. Se.2(47) 48. 50C & 52.

17 Capital Gain – Computation when only agreement to sale entered into without giving

possession- whether 50C applicable. Smt. Devindraben I. Barot V/s ITO (2016) 141 DTR Ahd. Tribunal 302. Assessee having entered into successive Banakhats for the same land with two

different parties without giving any possession of the land and later the first party having entered into a sale transaction of the said land with the other party with whom assessee had entered into Second Banakhat the sale transaction took place between the said parties interse and the assessee only relinquished her right in the property which can not be equated with land or building or both and therefore Se.50C can not be applied to the facts of the case.

18. Amount received by partner for relinquishing share in firms whether Se 45 (4)

Applicable (?) Sharadha Terry Products Ltd V/s Asst. CIT (2016) 141 DTR (Chennai Tribunal) 220

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Assessee Partner having received the amount against its credit balance in the capital account and current Account on its retirement from the firm and not for relinquishing or extinguishing its rights over the Assets of the firm, the same is not taxable under Se.45 (4), more so as the amount was not credited to its account on the date of retirement of signing the deed of retirement .

19. Capital Gains: Applicability of Se 45 (4):

Sharadha Terry Products Ltd. V/s Asst. CIT (2016) 141 DTR(Chennai )(Tribunal) 220 (191)

Amount received by partner for relinquishing share in firm- Assessee Partner having received the impugned amount against its credit balance in the capital account and current account on its retirement from the firm and not for relinquishing or extinguishing its rights over the assets of the firm, the same is not taxable under Se.45 (4) more so as the amount was not credited to its account on the date of retirement on signing the deed of retirement.

E. SECTION 68 & 69 . 1. Cash Credit used of material against Assessee. H.R Mehta V/s ACIT (Bombay HC) (itatonline.org) The assessee is bound to be provided with the material used against him apart from

being permitted to Cross examine the deponents- The denial of such opportunity goes to root of the matter and strikes at the very foundation of the assessment order and render it vulnerable.

2. Se.69:- Unexplained Investment. CIT V/s Vatika Landbax (Pvt) Ltd. (2016) 383 ITR 320 (Delhi HC) Search and Seizure:- It was not open for AO to draw an inference on the basis of

projection of document which was ‘dumb’ document- when the assessee offered a plausible explanation for document- The burden shifted on Revenue and hence the addition made was unjustified.

3. Cash Credits

Dy CIT V/s. Global Mercantile (P) Ltd. (2016) 157 ITD 924 (Kol) Tribunal. Share Application Money- Assessee had given complete details about share applicants-

Clearly establishing their identity and credit worthiness addition could not be made. 4. Addition u/s 69C:- P.M. Abdulla V/s Income tax Officer (Karnataka High Court) (2016) 139 DTR (Kar) 124 (155) Income from undisclosed Sources: Unexplained Expenditure be sundry Creditors as

reflected in the balance sheet of the assessee were not proved by the assessee though sufficient opportunity was granted- principle contained in section 68 as well as Se.69C would be Squarely applicable to Sundry Creditors in case of a trader, as obtained in the

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facts of the present case. In fact, Credit purchases are nothing but Expenditure and if Sundry Credits are not proved by the assessee addition can be made by an A.O by resorting to Se.69C.

5. Cash Credit: Company – Share Application Money:- CIT V/s K.C Pipes (P) Ltd. (2016) 386 ITR 532 (P & H) Share application Money – Assessee can not be held liable if shareholders have

acquired Money illegally- Se.68. 6. Income from undisclosed sources: Bogus Purchases:- Kalyani Medical Stores V/s CIT (2016) 386 ITR 387 (Cal) Income from undisclosed Sources: Bogus Purchases- Genuineness of purchase

transaction- question of fact- Burden of proof on Assessee- Satisfactory evidence not adduced despite being given opportunity- Addition proper.

7. Bogus Purchases. Income tax Officer V/s Deepak K. Mehta (2016) 50 ITR (Trib) 229 Mumbai. Bogus Purchases- Hawala Dealers providing Bogus Purchases Bill against which

payment made by assessee by cheque, No actual supply of material but cash returned to assessee after deducting commission. Expenditure treated as Income of assessee:- CIT(A) directing 3 percent gross profit rate to be taken on Bogus purchases. Appeal to Appellate Tribunal by Income tax Department Direction for further addition of 2 (2 +3) total 5% of alleged Bogus purchases to cover payment of commission in cash by assessee to Hawala Dealers Se.69C.

Following Reliance Cables and Conductors (P) Ltd. V/s. ITO ITA No 3311/ Mum / 2011 dated 25/07/2016 relied on. (Please read the case law carefully)

8. Cash Credit Share Premium:- Pushpak Bullion (P) Ltd. V/s Dy CIT Circle 3 (1) (2016) 71 Taxmann.com 326 (Gujarat State) Mere fact that a Seizable sum in nature of share premium was received would not

automatically mean that same was artificially increased initiation of re-assessment on basis of this reason was not proper.

9. Loss: Genuineness:- Onus of proof:- Sham Sunder Khanna V/s CIT (2016) 386 ITR 461 (P & H)

Assessee not producing relevant material or witnesses for Cross examination- Evidence- Indicating no trading transaction carried out but mere accommodation entries- Assessee not discharging onus- Departments failure to summon witnesses immaterial Se.131.

10 Cash Credit: Share Application Money. Principal CIT V/s. Soft line Creations (P) Ltd. (2016) 387 ITR 636 (Delhi H.C)

Share Application Money- Assessee providing PAN No. Bank details of share Applicants and affidavits of directors of Share Applicant Company. Share Application

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Money can not be considered as unexplained Cash credits in the hands of assessee. Concurrent findings of Fact . Appeal dismissed

11. Income – Accrual: CIT V/s. Neon Solutions (Pvt) Ltd. (2016) 387 ITR 667 (Bombay H.C) Income- Accrual- Mercantile System of accounting- Non convertible unsecured

Debentures issued by group company,. Group companies in financial difficulties- Resolution passed by Board of directors of assessee to waive Interest on Debentures for Six years (As the Company which issued was in financial difficulties waiver of interest on the debentures till March 2010 was approved at a meeting of the Debenture holders in 2004. A resolution was passed by the Board of directors of the assessee company to this effect). Tribunal holding that even though Assessee following mercantile system of accounting interest did not accrue. Neither perverse nor arbitrary Notional Interest can not be brought to tax (Se.145 (1).

12 Bogus Purchases:- ITO V/s. Premier Traders Self- Help Group. (2016) 51 ITR (Tribunal) (S.N) 17 Kolkata] Assessee engaging in purchase and sale and stone boulders the notice under Se.133

(6) could not be served on selling parties does not mean purchases Bogus- Assessee receiving payment by way of cheque against supply of send . Not possible to accept sale without accepting corresponding purchase against such sale, failure by Assessing Officer to bring any defect in books of account of assessee order deleting addition proper Se. 133 (6).

13. Cash Credit unexplained Cash Credit. Jaico Textiles (P) Ltd V/s ITO (2016) 51 ITR (Tribunal) (S.N) 49 Mumbai (issue No.2)

Unsecured Loans. genuineness and creditworthiness of transaction. Accommodation entries- Fund transferred to assessee through Banking Channel confirmation from respective parties and parties responding to summons and their permanent Account Numbers and copy of Income tax returns also submitted . Amount advanced to assessee reflected in their books . Genuineness of transactions established. Loans not to be treated as unexplained .I.T Act 1961 Se.68.

14. Bank Pass Book. Whether 68/69 Applicable.

Smt. Manasi Mahendra Pitkar V/s. ACIT ITA No 4233 & 4224/Mum/2015 A.Y. 2011-12. Date of order 12/8/2016.

(2016) 73 Taxmann.com 68 (Mumbai Tribunal) S.M.C, Se.68. The Bank Pass book or Bank Statement can not be construed to be a book maintained by the assessee fro any previous year as understood for the purposes of Se.68.

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F. ASSESSMENT – REASSESSMENT APPEAL ETC (1) Charge of Income tax: Wrong PAN Mentioned:-

M. Sathynarayana V/s ITO (2016) 238 Taxman 79 Karn (HC) Merely because PAN of Karta was mentioned in TDS Certificate could not be a reason to tax the rental Income in the hands of KARTA especially when, in all the year Except the present year the Department has not challenged the taxability of the said Income in the hands of HUF

(2) Return of Income condonation of delay in filing Return Regen Infrastructure & Services (P) Ltd V/s CBDT (2016) 384 ITR 407 (Madras H.C) Delay of one day- due to technical snags in the Departments web site return uploaded, only in midnight and hence date of filing recknowed by Department as the next day- Held reason for delay satisfactory explained. Delay to be condoned.

(3) Admission of undisclosed Income by Assessee whether conclusive(?) CIT V/s. Ramanbhai B. Patel (Gujarat HC) itatonline.org. Admission- Admission by assessee is not conclusive If no evidence is found to support the admission- A retraction, through belated is valid, Failure to provide Cross- examination of persons whose statements are relied up is FATAL to the addition- CBDT. Directive F No 286/98/2013 IT (inv II) dated 18/12/2014 prohibits additions on the basis of confession.

(4) Assessment- Duty of the A.O is to allow deduction even if not claimed in return. Dy CIT V/s Wipro Ltd (2016) 382 ITR 179 (Karnataka H.C) Un availed MODVAT credit can not be construed as Income and there is no liability to pay tax on such unavailed MODVAT Credit.

5. Appellate Tribunal:- Cross objection. CIT V/s. New Mangalore Port Trust (2016) 382 ITR 434 Karnataka H.C Cross objection is not prescribed against appeal filed against order under Se.263 of the

Act. Hence Cross objection is not maintainable. 6. Appellate Tribunal. Sheo Kumar Mishra V/s Dy CIT (2016) 382 ITR 424 Cal (HC) No jurisdiction to make addition which Assessing Officer or CIT (A) did not make and on

which no appeal or cross objection filed by Department. 7. Reassessment – Validity:-

Dushyant Kumar Jain v/s Dy CIT (2016) 139 DTR (Del) 209 A.Y. 2007 -08. Notice by AO not having jurisdiction- Notice under S.148 issued on 14th March 2014 by

A.O other than the one who had jurisdiction over the assessee, was without jurisdiction- subsequent notice issued on 23rd June 2014 was barred by limitation under Se.149 (1)(b) Proceedings for reassessment invalid.

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8. Search and Seizure: Assessment in Search Cases:- CIT V/s Garinder Singh Bawa (2016) 386 ITR 483 (Bombay) No assessment pending at time of initiation of proceedings- Finding by Tribunal that no

incriminating evidence found during course of search- finalized Assessment or reassessment shall not abate Se.132 & 153A.

9. Revision Erroneous and prejudicial to Revenue:- Rajmandir Estate (P) Ltd V/s Principal CIT (2016) 386 ITR 162 (Cal) [Se.263 of I.T Act 1961]. Substantial Increase in Share Capital of Company. No proper enquiry into contribution

for shares- Evidence that transaction was not genuine- order or revision- VALID . 10. Writ- Reassessment- Company- Dissolution:- Jitendra Chanralal Navlani & Others. (2016) 386 ITR 288 (Bombay H.C)

Notice- issued and order passed in respect of non- Existing dissolved entity without jurisdiction- Proceeding restrained- IT Act 1961. 143 (3) 147, 148.

11 Assessment. Reliance Fresh Ltd. V/s. Asst. CIT (2016) 50 ITR (Tribunal) 150 (Mumbai). Assessment to be based on return- Return to take precedence over Accounts.

12. Best Judgement Assessment: Estimate of Income. Dy. CIT Central Circle 2 (2) Banglore V/s JSR Constructions (P) Ltd. (2016) 159 ITD 749 Banglore (Tribunal) Se. 144 of I.T Act 1961. Best Judgement Assessment (Conditions) S.144 read with

Se,44AD of I.T Act 1961. Civil Construction Business (Estimation of net Profit) A.Y. 2008-09. A.O estimated 8 percent. Net Profit though total receipt was Rs.65.29 lakhs i.e. above 40 lakhs on the ground that books of Accounts were not produced while assessee contended that books were audited and Audit Report was filed. It was found that in the preceding two Assessment years. Assessee had shown net profit of 1.7 percent and 2.21 percent which were accepted by Assessing Authority as well as whether estimation of net profit of 8% was not justified average of preceding two years was to be taken at G.P rate Held YES.

13. For Sale of depreciable assets Office Premises and purchase of another Office premises actual use is necessary (?)

M/s. Indogem V/s ITO 19 (1) (5) Mumbai. ITA No 3442/Mum/2016 A.Y.2012-13 date of order 24/8/2016. For Sale of depreciable Assets (Office Premises) and purchase of another office

Premises i.e. same block of Assets. Such assets Even if not but to use- is not requirement of Section 50 i.e. Se 50 (I) (III) occupation could be equated to the term use as contemplated u/s 32 of the Act . Where it cannot be equated to the concept of possession i.e. here it is suffice to hold that assessee acquired the property during the financial year for the purpose of Se.50 (I) (III) of the Act.

14. Re-assessment: Scope of proceedings:- CIT V/s Monarch Educational Society (2016) 387 ITR 416 (Delhi H.C)

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No addition made on basis of issues recorded in grounds for re-assessment. Assessing officer can not make additions on any other issue during course of reassessment proceedings I.T Act 1961 Se.147 Explanation 3 Se.148.

15. Power of Income tax Tribunal to grant stay of disputed tax.

Principal CIT V/s. Carrier Air Conditioning and Refrigeration Ltd. (2016) 387 ITR 441 (P & H). Se. 254 (2A) Recovery of Tax Appeal to Tribunal- Stay of proceedings. Tribunal has power to grant stay for a period exceeding three hundred and Sixty five days.

16. Assessment of undisclosed Income. Principal CIT V/s. Saumya Construction (P) Ltd.

(2016) 387 ITR 529 (Gujarat H.C) Assessment. Search and Seizure- Assessment of undisclosed Income. Condition precedent for application of Se 153A.. Discovery of incriminating material during Search. (i.e. the assessment should be connected with something fund during the search or requisition i.e incriminating material. Which reveals undisclosed Income.]. Assessment on basis of statement of third person. Not valid Se.153A.

17 Reassessment – Validity:- H.R. Mehta V/s. Asst- CIT (2016) 387 ITR 561 (Bombay H.C) No opportunity for assessee to be heard- Violation of principles of natural justice.

Reassessment not valid. SS 147 – 148.

18. Power of Tribunal:- Principal CIT V/s Nilkanth Concast (P) Ltd.

(2016) 387 ITR 568 (Delhi H.C) Appeal to Appellate Tribunal- Power of Tribunal- Power to consider issue not raised before CIT (A) but raised before it first time. The power of the Tribunal are wide enough to consider a point which may not have been urged before the commissioner. (Appeals) as long as the question requires to be examined in the interest of justice.

19. Mayank Chaturvedi and other V/s Union of India. (2016) 387 ITR 593 (Allahbad H C) Search and Seizure validity- Condition precedent Reason to believe Income would

not be disclosed to Income tax. Authority Reason must be based on relevant material- Income tax survey showing undisclosed cash and documents warrant of authorization issued by competent Authority- Search Valid- (in two other cases].

No material or information in possession of authorities give rise to existence of any circumstances on specified in Section 132. Search illegal and unauthorized Se.132.

20. Cross Examination opportunities:- .

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Apeejay Education Society V/s. Asst. CIT \ (2016) 51 ITR (Tribunal) 5 Amritsar. Search and Seizure. Statement recorded Ex-parte- not to be relied upon in the absence of Cross Examination Testimony of shifty witness not credit worthy- Statement either to be accepted be accepted in full or rejected in to I.T Act 1961 Se.132A.

21. Power of CIT (A) Mega trends Inc V/s CIT (2016) 388 ITR 16 (Madras) H.C Scope of Powers. Conterminous with those Assessing Officer Power to determine

state of assessee Se.251 (1) (a) 22.. Accounting- Rejection of Accounts. CIT V/s. Micro Instruments company (2016) 388 ITR 46 (P & H) rejection of

Accounts- Estimation of Income- fall in Gross Profit rate finding by Tribunal that assessee had reasonable Explanation for fall. Tribunal Justified in deleting addition.

23. Territorial Jurisdiction of Court:- CIT V/s. Tibetan Children’s Village (2016) 388 ITR 126 (P & H) High Court. Appeal to High Court Territorial Jurisdiction of court Competent Court is high court

exercising territorial jurisdictions over situs of Assessing Officer. IT Act 1961 se. 260A.

24. Revision. Limitation from original Assessment or Revised Assessment(?) (2016) 388

ITR 135 (Allahabad H.C) L.G., Electron ics India (P) Ltd. V/s Principal CIT Revision- Limitation- Reassessment in respect of items other than item sought to be

revised by CIT – Period of limitation begins from original assessment- not from date of reassessment in which item was not dealth with I.T Act 1961. 263 (1) (2).

25. Rectification of mistakes: Rajsthan Explosives and Chemicals Ltd V/s Joint CIT (2016) 51 ITR (Tribunal) 445 Jaipur. Rectification of Mistakes. Principle of Consistency: Order of CIT (A) allowing

carried forward of Losses in Earlier year accepted by Department- CIT (A) on same set of facts rejecting rectification to allow assessee to carried forward Loss of current year- CIT (A) ought to have followed his earlier order and allowed rectification application for current year. Se.154. Radhasoami Satsang V/s CIT (1992) 193 ITR 321 (SC) followed.

26. Re-assessment- When valid- No Cross examination opportunity. ITO V/s. Soft line

creations (P) Ltd. (2016) 51 ITR (Tribunal) (Delhi) 460. Information from Investigation wing that assessee receiving accommodation entries

from various persons and entities- cannot without proper enquiry be sole basis for re.opening assessment . Assessee making specific demand for Cross- examination

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of department- A.O using Statement against assessee without giving opportunity for Cross- examination- violation of principles of natural Justice- Addition on account of accommodation entries not permissible [Se.68, 147/148].

27 Statement and retraction:-

Vijay L. Bhawe V/s. Asst. CIT (2016) 51 ITR (Tribunal) 474 (Mumbai) Search and Seizure- Assessment in Search cases undisclosed Income- availability of

cash established but amount offered for a taxation in mistaken belief that amount should be recorded in books- Individual assessee not required to maintain books- Addition on basis of Statement of assessee recorded at time of search incorrect.

28. Re-assessment: Notice- Validity.

Ujagar Holdings (Pvt) Ltd. V/s ITO (2016) 51 ITR (Tribunal) 343 Delhi. Reasons for notice not furnished to assessee- A.O not complying with direction of

Supreme Court . GKN Drive shafts (India) Ltd. V/s. ITO (2003) 259 ITR 19 (S.C) to provide reasons

for re-assessment within a reasonable time Re-assessment not valid. 29. Return- Revised Return. Exemption- Whether requirement of specific Instructions by

CBDT (?) Mrs. Leena R. Phadnis V/s CIT

(2017) 387 ITR 721 (Bombay H.C) Voluntary retirement- Bank Employee- Delay in filing raised return- condonation of delay- finding that assessee would face genuine hardship it revised application not entertained- No requirement of specific Instructions by C.B.D.T to Department to entertain revised Return. Delay in filing revised return to be condoned. Se. 10 (10C), 119 (2) (b).

G. TAX DEDUCTED AT SOURCE. 1. Se 40(a) (ia): Amount not deductible.

R.K.P Company V/s ITO (Raipur) Tribunal itatonline.org. Deduction at source Second proviso to Se.40 (a) (ia) inserted by finance Act 2013 should be treated as retrospectively applicable from 1st April 2005. When there are conflicting judgements of non- jurisdictional High Court. It has to be follow the view which is in favour of the assessee even if it believes that This view is not the correct law.

2. Credit for tax deducted at source:- Effect of Rule 37BA IVACL-JL (JV) V/s Asst. CIT (2016) 386 ITR 564 (T & AP) Effect of Rule 37BA- Joint Venture with State Government work- entrusted to sub- contractors- Tax deducted at source by State Government- Assessee entitled to refund of tax deducted at source- IT Act 1961 194C.

3. TDS: CIT V/s Canara Bank (2016) 386 229 (P & H)

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Failure to deduct Payments of Interest to entities exempted from tax- No need be deducted at source . IT Act 1961. SS 10 (23C) (IV), 194A, 194H 201(1) (1A).

4. Se.194A: Non filing of 15H/15G forms with CIT consequences. Dy. CIT V/s. Soniput Central Co-op. Bank Ltd. (2016) 50 ITR (Tribunal) SN 87) Delhi. Deduction of tax at source- Interest- Interest on fixed Deposit Exempt from tax under Se,.10 (20). No deduction of tax at source required on Interest paid to Municipal committee failure to furnish declaration in form 15G/15G on time. Bonafide mistake No Loss to Revenue- order deleting addition proper Se. 20 (1), (1A).

5. Provision of Se.194J when Applicable (?) ITO V/s Fino Fintech Foundation (2016) 159 ITD 743 Provisions of Section 194J would be applicable only if any managerial, technical or

consultancy services are provided to an assessee and mere use of technology would not make any services Managerial, technical or consultancy service.

6. Deduction of Tax at Source- Electricity. Asst. CIT V/s. Gulbarga Electricity supply Company Ltd.

(2016) 387 ITR 484 (Karnatka H.C) Fees for technical Services Assessee purchasing and selling. Electricity- Transmission of Electricity by state Power Transmission Corporation- Not technical Services. Tax not deductible on amount paid for such transmission.

7. Subscription to E Magazines: Whether TDS Provision Applicable. CIT V/s India Capital Markets (P) Ltd., (2016) 387 ITR 510 (Bombay H.C) Business Expenditure. Disallowance- Payments liable to deduction of tax at source:-

Professional services- Subscription to E- Magazines. No rendering of professional services Tax not deductible at source as subscription- subscription deductible I.T Act 1961 Se 40 (a) (ia).

See (2016) 364 ITR (St)122 Ed]. 8. Assessee- Meaning of – Person responsible for deducting Tax on payment to non-

resident is an assessee SS 2(7) (9) (1) Se.160 Sun flag Iron & Steel Co. Ltd. V/s CBDT (2016) 387 ITR 674 (Bombay H.C) Refund- Interest on Refund – TDS in Excess on payment to non- resident- Wavier on

payment by non- resident on 1/7/1992. Person deducting tax entitled to refund and interest on Refund- Application for refund only on 31/3/1994 Interest payable from 31/1/1994 till date of actual refund Se.240, 244A.

9. Deduction of Tax at Source Interest.. Co-operative Bank. CIT V/s National Co. operative Bank Ltd.

(2016) 387 ITR 702 (Karnataka).

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Deduction of tax at source. Interest- Co-operative Bank. Tax Not deductible at source on Interest on Time Deposits of members paid or credited before 1/7/2015 Se.194A. Se. 194A 13 (V) / 194A (3) (i) (b)

10 Transaction charges paid by broker to the stock Exchange. Whether 194C or 194J

Provisions applicable (?) First Global Stock broking (P) Ltd. V/s.. Dy CIT (2016) 51 ITR Tribunal (SN) 132 Mumbai. Deduction of tax at source: transaction charges paid to stock exchange as member-

Payments made for facilities provided by Stock Exchange- No tax deduction at source on such payment.

H. INTERNATIONAL TAXATION SE.195 ETC. 1. Writ – assessee A non- resident shown as beneficiaries in Swiss Bank Account.

Soignee R. Kothari V/s Dy CIT (2016) 386 ITR 466 (Bombay) Re-assessment proceeding based on information received by Central Board of Direct Taxes from French Government. Non- co-operation by assessee in obtaining necessary documents from foreign Bank- court will not interfere under writ jurisdiction.

I. PENALTIES. 1. Penalty- Concealment: Bogus Purchases.

Pr. CIT V/s Fortune Tele no comps (P) Ltd. Delhi HC. Itatonline.org. If the assessment order in the quantum proceedings is altered by an appellant authority in a significant way the very basis of initiation of the penalty proceedings is rendered non- existent and the A.O can not continue the penalty proceedings on the basis of the same notice. The High Court relied on Calcutta High Court decision in, CIT V/s Ananda Bazar Patrika (Pvt) Ltd (1970) 116 ITR 416 (Cal) the ITAT held that once, the basis for initiation of penalty proceedings was altered or modified by the first appellate authority. The A.O has no jurisdiction thereafter to proceed on the basis of the finding of the first appellate authority.

2. Penalty: Concealment- Received Interest with Refund amount:- non inclusion in Return of Income.

CIT V/s. Pilani Investments & Industries Corp. Ltd. (2016) 383 ITR 635. The Assessee received Interest with refund amount did not include in Profit and Loss

Account but disclosed same in notes to accounts- could not be said that assessee had furnished inaccurate particulars.

3. Concealment of Income:- Furnishing of Inaccurate Particulars of Income. Nayan C. shah V/s Income tax Officer.

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(2016) 386 ITR 304 (Gujarat H.C) Incorrect claim of Expenditure does not amount to furnishing inaccurate particulars of

Income. Tribunal Imposing penalty on ground of suppressing actual particulars of Income without serving notice to assessee, order of Tribunal not sustainable. Penalty to be quashed.

9. Principal CITG V/s. Rana Sugar Ltd.

(2016) 386 ITR 316 (P & H) Concealment of Income or furnishing of inaccurate particulars of Income. Disallowance of claims to deduction claim of assessee not found to be mala fide. No error in conceding penalty imposed following CIT V/s. Reliance Petro products (P) Ltd. (2010) 322 ITR 158 (SC) relied on.

10. Penalty- concealment of Income:- Ajay Gupta v/s. Dy. CIT (2016) 50 ITR (Tribunal) 179 (Delhi) Statement Under Section 132 (4) Surrender of Commission Income disclosure in return and payment of tax thereon. No incriminating material found for addition made on account of surrender- Additions deleted. Penalty not leviable. Se.132 (4) read with Se.271 (1) ( c).

11. Penalty u/s 271 (1)( c) / 271 AAA. Ashwani Kumar Arora V/s. Asst. CIT (2016) 50 ITR Tribunal 37 (Delhi) Search & Seizure: Undisclosed Income- Assessee admitting undisclosed Income accrue to him and his three brothers in their Individual Capacity by way of trading in various commodities and real Estate and facts were duly corroborated from seized material- Assessee case falling under section 271AAA and not under Se.271 (1) (c ). No penalty under Se.271 (1) ( c ) can be imposed in respected 271AAA and not under Se.271 (1) ( c). No penalty under Se. 271 (1)( c) can be imposed in respect of undisclosed Income. [Search on 10.2.2009]

8. Levy of fees under Se.234E. Arpana Motors (P) Ltd. V/s. Dy CIT. Kash Realtors (P) Ltd, V/s ITO (2016) 50 ITR (Tribunal) 29 Mumbai. Deduction of Tax at source. Delay in furnishing Statements of Tax deduction at source- Period prior to 1/6/2015 fee for defaults in furnishing statements- can not be levied in course of intimation u/s 200A- IT Act 1961. SS 200A 234E.

9. Bogus Purchases: 5 percentage retained addition to Cover-up inflation of Expenses- Whether attract penalty u/s 271 (1) ( c).

Shri Madhukant B. Gandhi V/s ITO 25 (3) (1) ITA No 7463/Mum/2012 (A.Y. 2005-06) date of order 29/06/2016. If the sales is accepted there must be purchases and there may be possibility of Inflation

of purchases-/ rates. However this finding itself shows that the basis of addition made by the A.O was not correct and otherwise also application of net profit from 2.13 to 5% can

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not be ground for levy or penalty u/s 271 (1) ( c ). Accordingly penalty u/s 271 (1) ( c) is hereby deleted.

10 Failure to deduct whole or any part of Tax as required. Hindustan Coca Cola Beverages (P) Ltd V/s Joint CIT

(2016) 387 ITR 471 (Delhi H.C) Deduction of Tax at Source- Failure to deduct whole or any part of tax as required- Penalty- Difference between Section 271C and 271(1) (c ) Reasonable cause for failure to deduct tax as required- short deduction of tax . Penalty can be imposed- Controversy regarding rate of deduction of Tax at source on amount paid for warehousing- Reasonable cause for short deduction of tax . Deletion of penalty justified I.T Act 1961 SS 271 (1) ( ) . 271C, 273B.

11. Failure to get Account Audited. Koramagala Club V/s ITO (2016) 387 ITR 63 (Karnataka H.C)

The Assessee was under bonafide belief that the provisions of Section 44AB were not applicable to a club while supplying beverages, liquor, etc to its members as it was not engaged in any business .

12 Fees for defaults in furnishing Certain Statements. MCA Pune V/s. Dy. CIT Ghaziabad (2016) 74 Taxman. Com 6 (Pune) Intimation issued by AO under Section 200A and or order passed under Section 154

read with Se.200A by A.O in charging fees under Se.234E is appeal able 13 ees leviable under Se.234E prior to 1/6/2015. Gajanan Constructions V/s Dy CIT Ghaziabad (2016) 73 Taxmann.com. 380

(Pune Tribunal) No fees could be levied under Section 234E prior to 1/6/2015. While passing

intimation under Section 200A as power to charge/ collect fees under Section 234E# was vested with revenue only on substitution of clause ( c) to Section 200A. Vide Finance Act (2015) with effect from 1/6/.2015. .

14. Penalty under Se.271D Limitation under Section 275 CIT V/s. Narayani & Sons (P) Ltd. (2016) 141 DTR (Cal) 315. Penalty under Se.271D Limitation under Se.275. Institution of proceedings by A.O

vis-à-vis Addln CIT- In a case falling under Se.271D the A.O is not precluded from initiating the proceedings by issuing a notice. A.O having issued notice on 26th December 2006. Penalty order passed by Addln CIT on 21st September 2007 after issue of fresh notice on 26th July 2007 was barred by limitation which expired on 30th June 2007.

Wish you Happy and knowledgeable New Year.

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DEMONETISATION – CASE LAWS

Place: A.J. Shah & Co.

(1) Demonetization: Case laws. Madhuri Das Narain Das V/s CIT

(1968) 67 ITR 368 Income [Se.4] Chargeable as- Assessee’s book actually showing a cash balance of above Rs.38,000/- as on the day of demonetization. In the absence of material before the Tribunal, it could not have been held that only 22 out of 28 high denomination notes represented cash balance and the remaining 6 Constituted Income from undisclosed sources.

(2) Se.68: Cash credits Explanation- Burden of proof Sumati Dayal V/s CIT (1995) 214 ITR 801 (S.C) Burden of proof- If explanation of the assessee is not found satisfactory- assessee’s

claim about the amount is not genuine. (3) Se.69 Income from undisclosed Sources:- GUR PRASAD HARIDAS V/s CIT (1963) 47 ITR 634 (All) H.C Burden of proof- Tribunal having accepted that some of the High denomination notes

belonged to assessee. It could not have treated the value of balance notes as assess’s undisclosed Income on the material on record.

(4) Unexplained Money and Reasonable Explanation. Kanpur Steel Co. Ltd V/s CIT (1957) 32 ITR 56 (All) H.C. Unexplained money etc. In pursuance of High Denomination Bank

Notes.(Denomination ordinance) 1946, Revenue Authorities could not treat Income from undisclosed Source of it explanation was reasonable.

(5) Se.69A: Books of Accounts accepted:- Lakshmi Rice Mills V/s CIT (1974) 97 ITR 258 (Patna H.C) Unexplained Moneys books of Account of assessee were accepted by Revenue as

genuine- Assessee not required to prove source as receipts of the said high denomination notes., Which were legal tender at that time

(6) Chunilal Ticumchand Coal Co. Ltd. V/s CIT

(1955) 27 ITR 602 (Pat) H.C. Se.69A:- Unexplained money- High denomination currency encashed on demonetization. Merely because assessee not mentioned High denomination notes in books before demonetization would not justify addition.

(7) Anil Kumar Singh V/s CIT (1972) 84 ITR 307 (Cal) H.C

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Se.143 (3) Assessment- Additions to Income- Assessee was unable to adduce any evidence or confirmation from currency addition justified.

(8) Acceptance of cash book: Mehta Parikh & Co V/s CIT (1956) 30 ITR 181 (S.C) Se.143 (3): Assessment Additions to Income. Encashment of High denomination

notes- Cash book of assessee having been accepted there could not have been challenged by the Revenue.

(9) Sri Saru Bhaskar Rao V/s CIT (2016) 386 ITR 419. (Orissa) H.C Se.143 (3) Assessment (Benami transactions) the Unit ‘P’ belongs to assessee and

Income of such unit is Income of the assessee. So the Income of the Unit ‘P’ should be clubbed with the Income of the assessee.

(10) Se.147. Income Escaping Assessment: Sreelekha Banergee V/s CIT (1963) 49 ITR 112 (SC) Income: escaping assessment- If there is entry in account books of assessee which

shows receipts of sum on conversion of high denomination notes- failed to explain source of said money, department was justified in treating value of said high denomination notes as Income.

(11) CIT V/s Allied International Product Ltd [2002] 120 Taxman 589 (Del.) (HC) S.271 (1) ( c) : Penalty- For concealment of income- Assessee declared on

19/1/1978 five high denomination notes of Rs.10,000/- each acquired from certain bank- On enquiry bank denied having issued such notes- Assessment was completed on a total of Rs.60,000/- rejecting assessee’s explanation and penalty u/s 271 (1) ( c ) was levied. Tribunal cancelled penalty on ground that explanation of assessee was rejected merely o n plea that certificate from bank was dated 9/1/1979 as against declaration on 19/1/1978. In fact no certificate was filed but letter issued by bank was dated 9/1/1979. Since order was passed by Tribunal merely on one statement an d real factual position was not kept in mind. Tribunal was unjustified in canceling penalty.

(12) CIT V/s Andhra Pradesh Yarn Combines (P) Ltd.

(2006) 282 ITR 490 (Ker) H.C) Se.271 (1 ( c) : Penalty- for concealment of income- Addition made to income of assessee u/s 69A and also levied a penalty u/s 271 (1) ( c) on ground that though assessee was in possession of high de nomination notes, it had not recorded same in books of account maintain ed by it and had failed to offer any explanation about nature and source of acquisition of money- assessee was found to be in possession of said high denomination notes, same did not have any representative value as RBI had refused to honour said notes when tendered for exchange, it could not be said that assessee was in possession of unexplained money warranting levy of penalty.

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(1) R.P.G Enterprises Ltd V/s DCIT (2016) 386 ITR 401 (Bombay HC) 240 Taxman 614/138 Taxman 49 (Bombay HC) Business Expenditure- Capital or Revenue Expenditure incurred on renovation of

rented premises is Capital in nature and therefore, depreciation is to be allowed. (2) Se.40 (a) (ia): Payment of wages through Agents. Jiauddin Mollah v/s CIT (2011) 385 ITR 394 (Cal) Amount not deductible- Payment of wages through Agents. No work contracts-

persons to whom payments made neither contractors nor sub contractors. No liability to deduct tax at source. Disallowance unsustainable (Se,194C)

(3) Se 40 (a) (ia): Amounts not deductible: Fright charges. Hightension Switchgears (P) Ltd., V/s CIT

(2016) 385 ITR 575/240 Taxman 582 (Cal) H.C Fright charges Assessee, buyer, reimbursing transportation Expenses- Liability to deduct tax at source on supplier under agreement- No liability on assessee to deductible tax (Se.194C)

(4) Se.41(1): Remission or cessation of trading liability- CIT V/s Alvares & Thomas (2016) 239 Taxman 456 (Karnataka H.C) Merely because creditor could not be traced cannot lead to cessation of liability.

(5) Se.14A:- Disallowance of Expenditure:- CIT V/s. Nicholas Piramal (India) Ltd (2016) 239 Taxman 470 (Bombay) HC:

Disallowance of expenditure, Exemption Income. If the Investments in tax free bonds were made out of assessee is own funds no disallowance could be made.

(6) S.132B: Application of Seized or requisitioned Assets:- Sushila Devi V/scCIT (Delhi) wwwitatonline.org Department’s recalcitrance to release the assessee’s Seized Jewellery- even though

it is so small to constitute ‘stridhan’ and even though no addition was sustained in the hands is not “mere in action” but is one of ‘deliberate harassment (Se.132)constitution of India Article 300A.

(7) Other Case. Shreemati devi V/s CIT (All) HC. (8) Se.143 (ID) Assessment- Refund AO cannot rely on Instruction No.1/2015 dated

13/1/2015 to withhold refund as He same has been struct down by the Delhi H.C. (9) Re-assessment No supply of reasons for reopening. CIT V/s. IDBI Ltd (Bombay H.C) wwwitatonline org. Non-supply by the AO of reasons recorded for reopening the assessment (Even

where the reopening is prior to GKN Drive shafts 259 ITR 9 (SC) renders the re-assessment order bad as being without jurisdiction (Se.148) relying on the following case laws:-

(a) Seista Steel Construction (P) Ltd (1984) 17 Taxman.122.. (Bombay H.C) CIT V/s. Videsh Sanchar Nigam Ltd. (2012) 21 Taxmann 53 (Bombay H.C)

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(10) S.153A:- Assessment- Search and Seizure:- CIT V/s Garinder Singh Bawa386 ITR 483 (Bombay H.C) No assessments pending at time of initiation of proceedings finding by Tribunal that

no incriminating evidence found during course of search. Finalized assessment or reassessment shall not abate.

(11) Se.2 (42A) Short term Capitol Asset: Period of holding is to be determined form the date on which the agreement to purchase:-

Labar Singh Siroya V/s ACIT (2016) 138 DTR 331 (Karntaka H.C) Period of holding is to be determined from the date on which the agreement to

purchase is entered in to by paying a substantial amount through the sale deed is executed at a later date.