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DATE: July 30, 2018 (Date of pronouncement)
DATE: August 3, 2018 (Date of publication)
AY: 2005-06, 2006-07, 2007-08, 2008-09, 2009-10
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CITATION:
S. 68 Bogus share capital: If copies of the share application form, share allotment Register and Bank Statements showing receipt of funds are on record and if all the shareholders have filed Affidavits declaring the fact that they are investing in the assessee-Company by issuing of cheques from their Accounts, the assessee has fulfilled the requirement of proving genuineness of the transaction, identity and creditworthiness of the shareholders/investors and addition cannot be made u/s 68

So far as the identity is concerned, we find that the persons who invested in the shares of the respondent-assessee had PAN numbers allotted to them which was made available by the respondent to the Assessing Officer. Besides, the shareholders had also filed Affidavits before the Assessing Officer pointing out that they had invested in the shares of the respondent assessee out of their own bank accounts. Copies of acknowledgement of Return of Income of the shareholders was also filed. The respondent also requested the Assessing Officer to summon the shareholders. These evidences have not been shown to be incorrect. Therefore, this objection with regard to identity of the shareholders not being established does not survive

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DATE: July 25, 2018 (Date of pronouncement)
DATE: July 31, 2018 (Date of publication)
AY: 2004-05
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CITATION:
S. 148/ 151: If the AO reopens the assessment by obtaining the sanction of the Commissioner of Income Tax instead of the Additional Commissioner of Income Tax, there is a breach of section 151 which renders the reopening void

It is undisputed position before us that in terms of Section 151(2) of the Act, the sanctioning/ permission to issue notice under Section 148 of the Act has to be issued by the Additional Commissioner of Income Tax. We find that the Assessing Officer had not sought the approval of the Designated Officer but of the Commissioner of Income Tax. This is clear from the Form used to obtain the sanction. In any case, the approval/ satisfaction recorded in the form submitted for sanction of the Commissioner of Income Tax by the Assessing Officer reproduced herein above, it is clear that the Additional Commissioner of Income Tax had not granted permission to initiate reopening proceedings against the Respondent Assessee

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DATE: March 9, 2018 (Date of pronouncement)
DATE: March 21, 2018 (Date of publication)
AY: 2004-05
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CITATION:
S. 254(2): Tribunal orders (in sister concern's case) are binding on the Tribunal unless set-aside or stayed. A rectification application on the ground that the orders in the sister concern's case are not correct is not permissible as it amounts to a review

The Revenue has filed appeals in the sister concern case for the Assessment Years 199697 to 200001 under Section 260A of the Act to this Court. The question raised therein is on the issue of appropriate classification of the rent/ compensation under the head ‘income from the other sources’ or under the head ‘income from the house property’. The aforesaid appeals have been admitted and are awaiting consideration for final disposal. Till such time, as the orders of the Tribunal of its Coordinate Bench in respect of the Assessment Years 1996-97 to 2000-01 are set aside or are stayed pending the final disposal, its ratio would, prima facie, continue to be binding. Therefore, even if the Revenue seek to contend to the contrary it would be a debatable issue. This cannot be a subject matter of rectification

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DATE: May 17, 2017 (Date of pronouncement)
DATE: May 25, 2017 (Date of publication)
AY: 2006-07
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CITATION:
S. 271(1)(c): 'Furnishing of inaccurate particulars of income' and 'concealment of particulars of income' have different connotations. The failure by the AO to specify in the s. 274 notice which of the two charges is applicable reflects non-application of mind and is in breach of natural justice as it deprives the assessee of an opportunity to contest. The penalty proceedings have to be quashed

A perusal of the quantum assessment order reveals that the penalty has been initiated for furnishing of inaccurate particulars of income and concealment of particulars of income which, as per settled legal propositions, are different connotations and carry different meaning and two separate limbs. The same also becomes clear from the language of show-cause notice which states that the assessee have concealed the particulars of income or furnished inaccurate particulars of income. Finally, the penalty has been levied for filing of inaccurate particulars of income and hence concealed particulars of income which shows inconsistent thinking on the part of AO. Undisputedly, the AO was required to specify the exact charge for which the assessee was being penalized which he has failed to do so and the same has resulted into taking away assessee’s valuable right of contesting the same and thereby violates the principles of natural justice

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DATE: April 28, 2017 (Date of pronouncement)
DATE: May 11, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 271(1)(c) penalty proceedings are “quasi-criminal” and ought to comply with the principles of natural justice. The non-striking of the irrelevant portion in the show-cause notice means that the AO is not firm about the charge against the assessee and the assessee is not made aware as to which of the two limbs of s. 271(1)(c) he has to respond. The fact that the assessment order is clear about the charge against the assessee is irrelevant (Samson Perinchery (Bom) followed, Kaushalya 216 ITR 660 (Bom) distinguished)

Apart from the aforesaid discussion, we may also refer to the one more seminal feature of this case which would demonstrate the importance of non-striking off of irrelevant clause in the notice by the Assessing Officer. As noted earlier, in the assessment order dated 10.12.2010 the Assessing Officer records that the penalty proceedings u/s 271(1)(c) of the Act are to be initiated for furnishing of inaccurate particulars of income. However, in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act of even date, both the limbs of Sec. 271(1)(c) of the Act are reproduced in the proforma notice and the irrelevant clause has not been struck-off. Quite clearly, the observation of the Assessing Officer in the assessment order and non-striking off of the irrelevant clause in the notice clearly brings out the diffidence on the part of Assessing Officer and there is no clear and crystallised charge being conveyed to the assessee u/s 271(1)(c), which has to be met by him. As noted by the Hon’ble Supreme Court in the case of Dilip N. Shroff (supra), the quasi-criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice, and in the present case, considering the observations of the Assessing Officer in the assessment order alongside his action of non-striking off of the irrelevant clause in the notice shows that the charge being made against the assessee qua Sec. 271(1)(c) of the Act is not firm and, therefore, the proceedings suffer from non-compliance with principles of natural justice inasmuch as the Assessing Officer is himself unsure and assessee is not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act he has to respond

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DATE: August 24, 2016 (Date of pronouncement)
DATE: September 21, 2016 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: The assessee is obliged to carry out a bench-marking exercise with independent comparables and prove that its transactions with AEs are at arms length. Mere fact that the transaction is approved by the RBI and Govt is not sufficient

The RBI approval/FIPB approval is not determinative of ALP and cannot be considered to be a valid CUP. Automatic route under which FIPB approvals or RBI approvals are granted have been devised for the “ease of doing business”. These approvals emanate from other legislation or policy and are not in relation to determination of Arm’s Length Price. The purpose of the RBI approval/FIPB approval is entirely different and cannot be equated with the arm’s length principle. The approvals of rates given by the DIPP and the RBI are for different purposes, like for promotion of industries, management of foreign exchange etc. and it varies in accordance with the business practices prevalent at different times which are clear from the RBI approvals themselves. Going by the relevant TP provisions as enshrined under the Act and relevant Rules, it is mandatory that the appellant has to independently benchmark its international transaction with independent comparables so as to arrive at arm’s length price

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DATE: March 29, 2016 (Date of pronouncement)
DATE: March 31, 2016 (Date of publication)
AY: 2005-06
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CITATION:
S. 9(1)(vii)/ 40(a)(ia)/ 194J: “Technical services” & “Managerial and Consultancy service” denotes services that cater to special & exclusive needs of the consumer/user. A "facility", even if termed as a service, which is available to all users, does not come within the ambit of “technical services” in Explanation 2 of s. 9(1)(vii)

“Technical services” like “Managerial and Consultancy service” would denote seeking of services to cater to the special needs of the consumer/user as may be felt necessary and the making of the same available by the service provider. It is the above feature that would distinguish/identify a service provided from a facility offered. While the former is special and exclusive to the seeker of the service, the latter, even if termed as a service, is available to all and would therefore stand out in distinction to the former. The service provided by the Stock Exchange for which transaction charges are paid fails to satisfy the aforesaid test of specialized, exclusive and individual requirement of the user or consumer who may approach the service provider for such assistance/service. It is only service of the above kind that, according to us, should come within the ambit of the expression “technical services” appearing in Explanation 2 of Section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act

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DATE: February 8, 2016 (Date of pronouncement)
DATE: February 12, 2016 (Date of publication)
AY: -
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CITATION:
S. 9(1)(vi) vs. Article 12 of DTAA: The retrospective amendment to s. 9(1)(vi) so as to supersede the law laid down in Asia Satellite 332 ITR 340 (Del) and assess transmission fees as “royalty” has no impact on assessees covered by DTAA because a corresponding amendment has not been made to the definition of “royalty” therein. Amendments to domestic law do not affect the DTAA

This Court is of the view that no amendment to the Act, whether retrospective or prospective can be read in a manner so as to extend in operation to the terms of an international treaty. In other words, a clarificatory or declaratory amendment, much less one which may seek to overcome an unwelcome judicial interpretation of law, cannot be allowed to have the same retroactive effect on an international instrument effected between two sovereign states prior to such amendment. In the context of international law, while not every attempt to subvert the obligations under the treaty is a breach, it is nevertheless a failure to give effect to the intended trajectory of the treaty. Employing interpretive amendments in domestic law as a means to imply contoured effects in the enforcement of treaties is one such attempt, which falls just short of a breach, but is nevertheless, in the opinion of this Court, indefensible

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DATE: December 8, 2015 (Date of pronouncement)
DATE: December 21, 2015 (Date of publication)
AY: 2007-08, 2008-09
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CITATION:
Commission earned by a non-resident agent who carried on business of selling Indian goods outside India cannot be said have deemed to be income which has accrued and/or arisen in India. Circular No. 23 of 1969 & Circular No.786 of 2000 were withdrawn on 22.10.2009. The withdrawal of a Circular cannot have retrospective operation

in CIT v/s. Toshoku Ltd. 125 ITR 525 the Apex Court held that the commission earned by the non-resident agent who carried on the business of selling Indian goods outside India, cannot be said have deemed to be income which has accrued and/or arisen in India. Circular No. 23 of 1969 and its reiteration in Circular No.786 of 2000 were in force during the Assessment Years. It was only subsequently i.e. on 22nd October, 2009 that the earlier Circular of 1969 were withdrawn. However, such subsequent withdrawal of an earlier Circular cannot have retrospective operation as held in UTI v. P. K. Unny 249 ITR 612

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DATE: October 28, 2015 (Date of pronouncement)
DATE: November 5, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 37(1): A business is “set up” the moment employees are recruited for the purpose of the business. All expenditure incurred thereafter is allowable as a deduction even if the business has not commenced

Setting up of business is different from commencement of business and the expenditures are allowable on setting up of business. The assessee has recruited employees for the purpose of its business and about 16 employees are for the job of quality assurance. In our considered opinion, upon recruitment of employees, the factum that expenditure under the different heads was incurred is indicative that business was set up

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