Category: Supreme Court

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DATE: October 3, 2019 (Date of pronouncement)
DATE: November 2, 2019 (Date of publication)
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CITATION:
Doctrine of mutuality: A club registered as a 'company' u/s 25 of Companies Act is not like other companies as it has no shareholders, no dividends declared, and no distribution of profits takes place. Such clubs cannot be treated as separate in law from their members. The ratio decidendi in Bacha F. Guzdar 27 ITR 1 does not apply to such clubs. When a club supplies goods to its members, there is no "sale" and sales-tax cannot be levied (Bangalore Club 350 ITR 509 (SC), Venkatesh Premises Coop Soc 402 ITR 670 (SC) & other imp judgements referred)

if persons carry on a certain activity in such a way that there is a commonality between contributors of funds and participators in the activity, a complete identity between the two is then established. This identity is not snapped because the surplus that arises from the common fund is not distributed among the members – it is enough that there is a 44 right of disposal over the surplus, and in exercise of that right they may agree that on winding up, the surplus will be transferred to a club or association with similar activities. Most importantly, the surplus that is made does not come back to the members of the club as shareholders of a company in the form of dividends upon their shares. Since the members perform the activities of the club for themselves, the fact that they incorporate a legal entity to do it for them makes no difference.

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DATE: October 25, 2019 (Date of pronouncement)
DATE: November 2, 2019 (Date of publication)
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Recall of ex-parte order: A 'power of attorney holder' is an 'agent' and 'Principal Officer' u/s 2(35). If a CA is granted a POA, service upon him of a notice is valid. If a notice is duly served upon the litigant through its authorized representative, and it was provided sufficient opportunity to appear before the Court and contest the matter but the litigant choses to let the matter proceed exparte, the order cannot be recalled

In State of Rajasthan v. Basant Nehata1 this Court held that : “A grant of power of attorney is essentially governed by Chapter X of the Contract Act. By reason of a deed of power of attorney, an agent is formally appointed to act for the principal in one transaction or a series of transactions or to manage the affairs of the principal generally conferring necessary authority upon another person. A deed of power of attorney is executed by the principal in favour of the agent.”

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DATE: October 16, 2019 (Date of pronouncement)
DATE: October 25, 2019 (Date of publication)
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CITATION:
Undisclosed income/ expenditure: A letter written in refutal of allegations contained in a news items with a without-prejudice offer cannot be treated as admission of non-disclosure or as an unconditional offer to pay tax. Also, the disclosure is by the USA Co and not by the assessee. It is not the case of the Dept that the amount has been received in the accounts of the assessee or spent for and on behalf of the assessee so as to be treated as undisclosed income of the assessee

In our opinion, such communication(s) cannot be treated as admission of non-disclosure as such. What is significant to note is that in the present case, the disclosure is attributed to Goodyear Tyre & Rubber Co., USA, filed by it in the proceedings in USA; and not by the assessee as such. It is not the case of the Department that the amount referred to in the said disclosure has been received in the accounts of the assessee or spent for and on behalf of the appellant – assessee under instruction, so as to be treated as undisclosed income of the appellant.

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DATE: August 21, 2019 (Date of pronouncement)
DATE: October 23, 2019 (Date of publication)
AY: -
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CITATION:
S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination

The entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Returnthe entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return

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DATE: October 15, 2019 (Date of pronouncement)
DATE: October 21, 2019 (Date of publication)
AY: 2019-20
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CITATION:
Black Money Act: It is not correct to say that while exercising powers under Sections 85 and 86 of the Black Money Act, the Central Government has made the said Act retrospectively applicable from 01.07.2015. The penal provisions u/s 50 and 51 of the Black Money Act would come into play only when an assessee has failed to take benefit of S. 59 and neither disclosed assets covered by the Black Money Act nor paid the tax and penalty thereon

Sub­-section (3) of Section 1 of the Black Money Act, itself provides that save as otherwise provided in this Act, it shall come into force on 1 st day of July, 2015. A conjoint reading of the various provisions would reveal, that the Assessing Officer can charge the taxes only from the assessment year commencing on or after 01.04.2016. However, the value of the said asset has to be as per its valuation in the previous year. As such, even if there was no change of date in sub­section (3) of Section 1 of the Black Money Act, the value of the asset was to be determined as per its valuation in the previous year. The date has been changed only for the purpose of enabling the assessee(s) to take benefit of Section 59 of the Black Money Act. The power has been exercised only in order to remove difficulties. The penal provisions under Sections 50 and 51 of the Black Money Act would come into play only when an assessee has failed to take benefit of Section 59 and neither disclosed assets covered by the Black Money Act nor paid the tax and penalty thereon. As such, we find that the High Court was not right in holding that, by the notification/order impugned before it, the penal provisions were made retrospectively applicable

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DATE: October 18, 2019 (Date of pronouncement)
DATE: October 19, 2019 (Date of publication)
AY: 2006-07
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CITATION:
S. 143(2): Mere mentioning of new address in the return of income is not enough. If change of address is not specifically intimated to the AO, he is justified in sending the notice at the address mentioned in PAN database. If the notice is sent within the period prescribed in s. 143(2), actual service of the notice upon the assessee is immaterial

It is required to be noted that notices under Section 143(2) of the 1961 Act are issued on selection of case generated under automated system of the Department which picks up the address of the assessee from the database of the PAN. Therefore, the change of address in the database of PAN is must, in case of change in the name of the company and/or any change in the registered office or the corporate office and the same has to be intimated to the Registrar of Companies in the prescribed format 12 (Form 18) and after completing with the said requirement, the assessee is required to approach the Department with the copy of the said document and the assessee is also required to make an application for change of address in the departmental database of PAN, which in the present case the assessee has failed to do so.

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DATE: September 26, 2019 (Date of pronouncement)
DATE: October 2, 2019 (Date of publication)
AY: -
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CITATION:
A concession given by Counsel, if it is a concession in law and contrary to the statutory rules, is not binding on the litigant for the reason that there cannot be any estoppel against law (see also Himalayan Cooperative Group Housing Society Vs. Balwan Singh (2015) 7 SCC 373 Bharat Heavy Electricals Ltd vs. Mahendra Prasad Jakhmola & V. Ramesh vs. ACIT (Madras High Court)

The concession given by the learned State Counsel before the Tribunal was a concession in law and contrary to the statutory rules. Such concession is not binding on the State for the reason that there cannot be any estoppel against law. The rules provide for a specific Grade of Pay, therefore, the concession given by the learned State Counsel before the Tribunal is not binding on the appellant

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DATE: August 13, 2019 (Date of pronouncement)
DATE: August 14, 2019 (Date of publication)
AY: -
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CITATION:
S. 143(2)/ 292BB: The failure to issue a notice u/s 143(2) renders the assessment order void even if the assessee has participated in the proceedings. S. 292BB does not save complete absence of notice. For S. 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself

According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself.

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DATE: August 13, 2019 (Date of pronouncement)
DATE: August 14, 2019 (Date of publication)
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CITATION:
S. 92CA(1) Transfer Pricing: CBDT's Instruction No.3/2003 dated 20.05.2003 makes it mandatory for the AO to make a reference to the TPO. The failure to make reference to the TPO renders the Transfer Pricing Adjustments made therein are bad in law though the assessment order is good. The matter should be restored to the file of the AO so that appropriate reference could be made to the TPO

In view of the guidelines issued by the CBDT in Instruction No.3/2003 the Tribunal was right in observing that by not making reference to the TPO, the Assessing Officer had breached the mandatory instructions issued by the CBDT

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DATE: July 25, 2019 (Date of pronouncement)
DATE: July 27, 2019 (Date of publication)
AY: -
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CITATION:
S. 170/ 292BB: A notice issued in the name of the amalgamating entity after amalgamation is void because the amalgamating entity ceases to exist. Participation in the proceedings by the assessee cannot operate as an estoppel against law. This is a substantive illegality and not a procedural violation of the nature adverted to in s. 292BB. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable.

In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment