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DATE: August 11, 2020 (Date of pronouncement)
DATE: August 14, 2020 (Date of publication)
AY: 2014-15
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S. 10(38)/68: Bogus Capital Gains from Penny Stocks: The AO has not discharged the onus of controverting the documentary evidences furnished by the assessee and by bringing on record any cogent material to sustain the addition. The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and other entities. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee's position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue

As against the assessee’s position, the primary material to make additions in the hands of assessee is the statement of Shri Vipul Bhat and the outcome of search proceedings on his associated entities including M/s SAL. However, there is nothing on record to establish vital link between the assessee group and Shri Vipul Bhat or any of his group entities. The assessee, all along, denied having known Shri Vipul Bhat or any of his group entities. However, nothing has been brought on record to controvert the same and establish the link between Shri Vipul Bhat and the assessee. The opportunity to cross-examine Shri Vipul Bhat was never provided to the assessee which is contrary to the decision of Hon’ble Supreme Court in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006) wherein it was held that not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statement of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounts to violation of principal of natural justice because of which the assessee was adversely affected

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DATE: May 16, 2019 (Date of pronouncement)
DATE: June 19, 2019 (Date of publication)
AY: 2009-10
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CITATION:
Bogus Purchases: The CIT(A) is not justified in enhancing the assessment to disallow 100% of the bogus purchases. The only addition which can be made is to account for profit element embedded in the purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases (PCIT vs. Mohommad Haji Adam (Bom HC) followed

The assessee was in possession of primary purchase documents and the payments to the suppliers was through banking channels. The assessee had established corresponding sales before Ld. AO. The books of accounts were audited wherein quantitative details of stock was provided. We are of the considered opinion that there could be no sale without actual purchase of material keeping in view the fact that the assessee was engaged in trading activities. At the same time, the assessee failed to produce even a single supplier to confirm the purchase transactions. The delivery of material could not be substantiated.

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DATE: June 27, 2018 (Date of pronouncement)
DATE: July 9, 2018 (Date of publication)
AY: 2012-13
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S. 23 ALV: Unsold flats which are held by a builder as stock in trade cannot be brought to tax under the head 'income from house property'. They are only assessable as business profits when sold (All judgements considered)

In the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head ‘income from business’. Thus, respectfully following the above said decisions we hold that the unsold flats which are stock in trade when they were sold they are assessable under the head ‘income from business’ when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head ‘income from house property’. Thus, we direct the AO to delete the addition made under Section 23 of the Act as income from house property.”

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DATE: February 14, 2018 (Date of pronouncement)
DATE: February 16, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 263: Even if there is lack of inquiry by the AO and the assessment order is "erroneous" under Explanation 2 to s. 263, the order is not "prejudicial to the interests of the Revenue" because Fringe Benefit Tax is not "tax" as defined in s. 2(43) and cannot be disallowed u/s 40(a)(v) or added back to "Book Profits" u/s 115JB

The only question that survives for our consideration is that whether the omission to carry out the stated adjustment in the Book profits as envisaged by Ld. CIT has made the quantum order erroneous and prejudicial to the interest of the revenue and whether the stated adjustment as suggested by Ld. CIT was tenable in law or not? In other words, we are concerned with whether the twin prime conditions viz. erroneous and prejudicial to the interest of the revenue for invoking the provisions of Section 263 was fulfilled in the instant case or not

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DATE: January 19, 2018 (Date of pronouncement)
DATE: January 23, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 271(1)(c) penalty: If the AO has not recorded any satisfaction in absolute terms whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income, the levy of penalty is invalid. The judgement of the Bombay High Court in Maharaj Garage cannot be read out of context or in a manner to mean that there is no need for mentioning the specific limb of section 271(1)(c) of the Act for which the penalty was intended to be imposed, as such issue never came up for consideration before the High Court

As far as the judgment of the Hon’ble Jurisdictional High Court in Maharaj Garage dated 22nd August 2017 in ITA no. 21 of 2008 relied upon by the learned Departmental Representative, on a careful reading of the said judgment, we are of the view that it will have no application to the facts of the case. As could be seen, the basic issue arising out of the reference application which fell for consideration of the Hon’ble Jurisdictional High Court was, while granting previous approval by Inspecting Assistant Commissioner of Income–tax as per provisions of section 271(1)(c)(iii) of the Act whether the assessee was required to be given an opportunity of being heard. While considering this issue, the Hon’ble Jurisdictional High Court observed that provisions of section 271(1)(c)(iii) does not attract rule of presumption of mens rea as the penalty imposable under the said provision is for the breach of civil obligation. The observations of the Hon’ble Court against issuance of show cause notice appears to be in the context of quantum of penalty proposed to be imposed and not with reference to the doing away with the issuance of show cause notice as contemplated under section 274 of the Act. Therefore, the judgment of the Hon’ble Court cannot be read out of context or in a manner to mean that there is no need for mentioning the specific limb of section 271(1)(c) of the Act for which the penalty was intended to be imposed, as such issue never came up for consideration before the Hon’ble High Court. That being the case, the aforesaid decision cannot be applied for rebutting the proposition that in the absence of recording of satisfaction regarding the exact nature of offence, no penalty under section 271(1)(c) can be imposed

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DATE: April 25, 2017 (Date of pronouncement)
DATE: August 1, 2017 (Date of publication)
AY: 2009-10
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CITATION:
S. 254(2): The amendment by the Finance Act 2016 w.e.f. 01.06.2016 to specify the time limit of 6 months to file a rectification application applies even to applications filed with respect to appeal orders passed prior to the date of the amendment. The Tribunal has no power to condone the delay in filing a Miscellaneous Application

It is to be noted that the earlier period of ‘four years’ has been substituted with ‘six months’ by the Finance Act, 2016 with effect from 01/06/2016. However, we find that no distinction has been made in this section between orders passed before 01/06/2016 and orders passed after 01/06/2016. Moreover, the Tribunal order was dated 22/03/2013 and therefore, the Revenue had ample time to go through the same and pin point the mistakes in the order but it has failed to do so. Therefore, we find no force in these miscellaneous petitions primarily because of the reason that the Statute does not authorize us to entertain any petition which has been filed u/s 254(2) at any time beyond a period of six months from the date of the order

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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: May 2, 2017 (Date of pronouncement)
DATE: May 9, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 271(1)(c): Bogus purchases cannot be assessed as 'unexplained expenditure' u/s 69C if the transactions are duly disclosed and payments are through banks. The fact that the sellers are not traceable and the assessee surrendered the bogus purchases does not justify levy of penalty. Mere non-striking of the options in the s. 274 notice does not render the penalty proceedings void if the assessment order shows due application of mind.

Section 69C could not be applied to the facts of the case as the payments were through banking channels which were duly reflected in the books of accounts and therefore, there was no unexplained expenditure within the meaning of Section 69C incurred by the assessee. Further, we find that the assessee was in possession of purchase invoices and various other documentary evidences qua these purchases. A bare perusal of the purchase invoices reveals that the assessee has purchased consumables etc. from the alleged bogus suppliers, which are connected, at least to some extent, with the business of the assessee. The assessee, during quantum proceedings itself filed revised computation of income after disallowing the alleged bogus purchases by citing the reason that the suppliers were not traceable during assessment proceedings. Nevertheless, the assessee was in possession of vital evidences in his possession to prima facie substantiate his purchases to some extent particularly when the payments were though banking channels. Merely because the suppliers could not be traced at the given address would not automatically lead to a conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee

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DATE: March 3, 2017 (Date of pronouncement)
DATE: March 11, 2017 (Date of publication)
AY: 2011-12
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CITATION:
S. 14A & Rule 8D: Disallowance under Rule 8D is not compulsory or mandatory. S. 14A(2) & Rule 8D cannot be invoked unless the AO examines the accounts and records the finding why the assessee's claim/ computation is not proper (entire law discussed and important judgements referred)

Thus, Rule 8D is not attracted and applicable to assessee who have exempt income and it is not compulsory and necessary that an assessee must voluntarily compute disallowance as per Rule 8D of the Rules. Where the disallowance or ‘nil’ disallowance made by the assessee is found to be unsatisfactory on examination of accounts, the assessing officer is entitled and authorised to compute the deduction under Rule 8D of the Rules. This pre-condition and stipulation as noticed below is also mandated in sub Rule (1) to Rule 8D of the Rules

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