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NuPower Renewables Pvt. Ltd vs. ACIT (Bombay High Court)

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DATE: March 7, 2019 (Date of pronouncement)
DATE: March 16, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 147 Reopening of Bogus share capital: Though the reopening is based on information supplied by the investigation wing, the reasons do not specify that the investment was non-genuine. The AO cannot reopen to investigate into the source of genuineness and creditworthiness of the investors as it falls within the realm of fishing enquiries which is wholly impermissible in law

The reasons do not specify that the information supplied to the Assessing Officer by the Investigation Wing, suggested that such investment was non­ genuine. In this context, Assessing Officer refers to the requirement of verifying the genuineness of investor and requirement of further investigation. These observations would not further the case of the Revenue, these being no information with the Assessing Officer, prima facie, indicating that the investments were not genuine. The investigation into the source of genuineness and creditworthiness of the investor company would fall within the relam of fishing enquiries, which is wholly impermissible in law in the context of the re­opening of the assessment

Sir Mohd. Yusuf Trust vs. ACIT (ITAT Mumbai)

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DATE: March 8, 2019 (Date of pronouncement)
DATE: March 16, 2019 (Date of publication)
AY: 2011-12
FILE: Click here to view full post with file download link
CITATION:
S. 50C Capital Gains: The adoption of stamp valuation as the sale consideration is not justified in absence of any evidence that the sale consideration was more than the value shown in the agreement. The AO has not brought on record that the property under sale was not was under various encumbrances and the assessee was having the absolute marketable title of the said property (All judgements considered)

The value adopted for the purpose of payment of stamp duty is not disputed by the assessee. The assessing officer has not brought on record that the property under sale was not was under various encumbrances and the assessee was having the absolute marketable title of the said property. No material is brought on record by assessing officer that the assessee has received much more consideration than shown in the MOI. The assessing officer treated the stamp valuation rate as the value of consideration, despite the facts that the assessee throughout the proceedings contended that the assessee was neither having possessing of the impugned piece of land nor having marketable title. The assessee offered the said piece of land on the basis ‘as is where is’. These vital facts were ignored by the lower authorities

CIT vs. Gopal Shri Scrips Pvt. Ltd (Supreme Court)

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DATE: March 12, 2019 (Date of pronouncement)
DATE: March 15, 2019 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
Defunct companies: The fact that the assessee company stands dissolved as a defunct company u/s 560(5) of the Companies Act, 1956 does not mean that income-tax proceedings & appeals become infructuous. The liability against such companies has to be dealt with in accordance with s. 506(5) proviso (a) of the Companies Act and Chapter XV of the Income Tax Act which deal with "liability in special cases" and "discontinuance of business or dissolution"

The High Court failed to notice Section 506(5) proviso (a) of the Companies Act and further failed to notice Chapter XV of the Income Tax Act which deals with “liability in special cases” and its clause (L) which deals with “discontinuance of business or dissolution”. The aforementioned two provisions, namely, one under the Companies Act and the other under the Income Tax Act specifically deal with the cases of the Companies, whose name has been struck off under Section 506 (5) of the Companies Act. These provisions provide as to how and in what manner the liability against such Company arising under the Companies Act and under the Income Tax Act is required to be dealt with

ITO vs. Synergy Finlease Pvt. Ltd (ITAT Delhi)

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DATE: March 8, 2019 (Date of pronouncement)
DATE: March 15, 2019 (Date of publication)
AY: 2006-07
FILE: Click here to view full post with file download link
CITATION:
S. 68 Bogus Share Capital: Merely presenting of documents & making payment through bank or appearance by director before the AO & admitting fact of share application made is in itself not sufficient to justify the genuineness of the transaction. It is against human probability that anyone will invest and pay share premium in a company without net worth or future prospectus. All applicants with common address are being controlled remotely by one person. These applicants are all paper companies not having sufficient worth and created for providing entries of share application money or share capital or loans by way of accommodation entries (NDR Promoter 410 ITR 379 (Del) & NRA Iron & Steel 103 TM.com 48 (SC) followed)

It is against the human probability that anyone will invest and pay share premium of Rs. 50/- per share without having any net worth of the company or any future prospectus of earning by the company. The current directors have not been able to justify, why the shares were purchased at high premium, without corresponding valuation of the company, which was having meagre income. It is impossible that directors of these nine companies are having either of the two addresses of the Paharganj area of New Delhi. In normal circumstances it is not possible until unless all these companies are being controlled remotely by one person. All the circumstances manifests that these are all paper companies not having sufficient worth and created for providing entries of share application money or share capital or loans by way of accommodation entries

ITO vs. Rayoman Carriers Pvt. Ltd (ITAT Mumbai)

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DATE: February 22, 2019 (Date of pronouncement)
DATE: March 15, 2019 (Date of publication)
AY: 2003-04, 2004-05
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CITATION:
Strictures: The insinuation of the Dept that ITAT passes order in a state of oblivion displays a totally irresponsible and cavalier approach on the cusp of contempt and deserving exemplary cost to purge the same. Referring in a deriding manner that the ITAT started with the grounds of appeal, displays the naivette of revenue authority purporting to be critical examiner of ITAT verdict, which is uncalled for. I express deep anguish at this approach of the department and hope that revenue will disband this cavalier and naïve approach while insinuating about the functioning of the ITAT without verifying their record

The insinuation that ITAT passes order in a state of oblivion to the facts and antecedents to the appeal, displays a totally irresponsible and cavalier approach on the part of Revenue on the cusp of contempt and deserving exemplary cost to purge the same. Furthermore, it is elementary knowledge that an appellate order has to be prefaced with the grounds or questions raised. Referring in a deriding manner that the ITAT started with the grounds of appeal, displays the naivette of revenue authority purporting to be critical examiner of ITAT verdict, which is uncalled for. Be as it may, I express deep anguish at this approach of the department and hope that revenue will disband this cavalier and naïve approach while insinuating about the functioning of the ITAT, without verifying their record.

CLSA India Private Limited vs. DCIT (ITAT Mumbai)

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DATE: January 16, 2019 (Date of pronouncement)
DATE: March 15, 2019 (Date of publication)
AY: 2012-13
FILE: Click here to view full post with file download link
CITATION:
S. 92C Transfer Pricing: It is mandatory for the AO to determine the arm's length price (ALP) of the international transactions by following one of the prescribed methods. He is not entitled to follow any other method or to resort to estimation. The failure to follow one of the prescribed methods makes the entire transfer pricing adjustment unsustainable in law. The legal infirmity cannot be cured by restoring the issue to the TPO. The TPO cannot be allowed another innings to rectify the mistake

Section 92C(1) of the Act, contemplates that the arms length price in relation to an international transaction shall be determined by comparable uncontrolled price method; resale price method; cost plus method; profit split method; transactional net margin method or such other method as may be prescribed by the Board. Hence, the TPO is bound to determine the ALP by following one of the prescribed methods, however, we notice that in the present case the Ld. TPO has not followed any prescribed methods and made the transfer pricing adjustment by estimating the man hours and the cost of service per hour. We therefore, find merit in the contention of the Ld. counsel that any ad-hoc determination of arms length price by the Ld TPO u/s section 92 de-hors section 92C(1) of the Act cannot be sustained

CIT vs. Tasgaon Taluka S.S.K. Ltd (Supreme Court)

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DATE: March 5, 2019 (Date of pronouncement)
DATE: March 9, 2019 (Date of publication)
AY: -
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CITATION:
S. 37(1)/40A(2) Business expenditure vs. sharing of profit: The AO has to take into account the manner in which the business works, the modalities and manner in which SAP/additional purchase price/final price are decided and determine what amount forms part of the profit. Whatever is the profit component is sharing of profit/distribution of profit and the rest is deductible as expenditure

Merely because the higher price is paid to both, members and non-members, qua the members, still the question would remain with respect to the distribution of profit/sharing of the profit. So far as the non-members are concerned, the same can be dealt with and/or considered applying Section 40A (2) of the Act, i.e., the assessing officer on the material on record has to determine whether the amount paid is excessive or unreasonable or not

Precilion Holdings Limited vs. DCIT (Bombay High Court)

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DATE: February 25, 2019 (Date of pronouncement)
DATE: March 9, 2019 (Date of publication)
AY: 2011-12
FILE: Click here to view full post with file download link
CITATION:
S. 147/148: If the AO is of the opinion that the issue requires verification, it tantamounts to fishing or roving inquiry. He is not permitted to reopen merely because in the later year, he took a different view on the basis of similar material. Even if the question of taxing interest income under the DTAA was not in the mind of the AO when he passed the assessment, he cannot reopen if there is no failure to disclose truly and fully all material facts

If during the assessment of the later assessment year, the Assessing officer collects or chances upon new material which may have bearing on the assessment of the assessee, and in case where the assessment is sought to be reopened beyond four years, he can also establish lack of true and full disclosures on the part of the assessee, it may be open for him to reopen assessment of the earlier year. However, merely because in the later year, the Assessing Officer takes a different view on the basis of similar material, which may have been collected during such process, would not permit him to reopen the assessment

Shamim Imtiaz Hingora vs. ITO (ITAT Pune)

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DATE: March 1, 2019 (Date of pronouncement)
DATE: March 9, 2019 (Date of publication)
AY: 2015-16
FILE: Click here to view full post with file download link
CITATION:
S. 10(38) Bogus Capital Gains from Penny Stocks: Though the AO did not find any mistake in the documentation furnished by the assessee, there is need for finding of fact on (i) the nature of the shares transactions; (ii) make-believe nature of paper work; (iii) Camouflage the bogus nature; and, (iv) the relevance of human probabilities etc (NDR Promoters 410 ITR 379 (Del) referred)

In the present case, it is beyond preponderance of probability that the fantastic sale price of a little known share i.e. Mishka Finance & Trading Ltd. without economic or financial basis, would increase from Rs.0.37/- to Rs.45/- per share. If one considers the fact that the assessee got 24,000/- shares against original 300 shares, the price increase is 120 times within 24 months which is evident from the fact that by investing Rs.9000/-, the assessee has got Rs.10,19,050/- (in respect of 22,500/- shares only) in a span of 24 months. There is no doubt that the capital gain was manipulated and bogus and was done only to claim exemption U/s 10(38). Once the entire transaction is viewed from the perspective of human probabilities, it definitely fails on all counts

Sanjay Jain vs. Nu Tech Corporate Service Ltd (Supreme Court)

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DATE: March 1, 2019 (Date of pronouncement)
DATE: March 7, 2019 (Date of publication)
AY: 2009-10
FILE: Click here to view full post with file download link
CITATION:
S. 226 illegal Recovery - Strictures against DCIT: High Court was not justified in its remarks against the DCIT and in issuing directions that (i) ‘deadwood’ should be weeded out (ii) personal costs of Rs. 1.5 lakh should be imposed (iii) adverse entry should be made in the Annual Confidential Report (iv) Denial of promotion etc. The directions were wholly unnecessary to the lis before the Court & are expunged

We find merit in the submission which has been urged on behalf of the petitioner that the High Court was not justified in its remarks against the petitioner and in issuing the directions which it has issued. The High Court, in the course of its judgment has issued a slew of directions including: (i) The necessity of weeding out ‘deadwood’; (ii) imposition of costs of Rs. 1.5 lakhs which are to be apportioned among two officers, out of them being the petitioner; (iii) Making an adverse entry in the Annual Confidential Reports of the petitioner; and (iv) Denial of promotion including monetary benefits to the petitioner. Apart from the fact that these directions were issued without specific notice to the petitioner, we find that they were wholly unnecessary having regard to the lis before the High Court. We accordingly, expunge the adverse remarks made against the petitioner in the impugned judgment and order of the High Court as well as the directions issued against the petitioner

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