S. 271(1)(c): The giving up of a bogus claim for deduction to eschew inquiry by AO/ TPO is not voluntary & bona fide & attracts levy of penalty
(iv) The assessee’s next plea is of a complete disclosure of material facts, made, adverting to the audit report u/s 92E. We are at loss to fathom even the import of the argument. It is only on failing, and abysmally at that, to demonstrate any business purpose of its relevant international transaction that a TP adjustment, valuing the same at nil, was advised by the TPO and came to be made. The disclosure per the audit report u/s 92E is thus both false and misleading. The argument of complete disclosure, unless the same is true, is of little consequence in law and, in fact, itself false. As such, looked at from any angle there has been both concealment as well as furnishing inaccurate particulars of income in the present case (Mak Data 352 ITR 1 (Del) affirmed in 358 ITR 593 (SC) referred)
High Court’s order on complaint of contempt by Judicial Member of ITAT against CA reveals sorry state of inter-se in-fighting between Hon’ble Members of the ITAT and members of the Bar
(i) The reference made by Hon’ble Sunil Kumar Yadav singly is not a reference by a subordinate court within the meaning of s. 15(2) of the Contempt of Courts Act for the reason that the other member of the division bench has not concurred with it. While this does preclude the Court from taking suo motu cognizance of alleged criminal contempt, the facts and circumstances do not make out a case for criminal contempt against the opposite parties. Certain startling facts are noted. One Bar Association passes a resolution against the conduct of one member of the ITAT whereas members of another Bar Association condemn the same and lodge the complaint against the other member of the ITAT. Both the members of the Tribunal did not concur in their views on various occasions. The complainant who is the Judicial Member of the ITAT has gone even to the extent of saying in his order that the Tribunal will not hear any appeal unless and until Bar Association passes the resolution condemning the particular act of an Advocate of moving the representation against him. The complainant has even observed in the said order that Bar Association should pass the resolution in a particular manner giving assurance that in case of decision in the any case, no such type of representation or complaint will be made to the President of ITAT and further that the protection be given from President of the ITAT with the assurance that such type of complaint/representation would not be entertained and erring Advocate will be dealt with severely. The said view expressed by the complainant-S.K. Yadav, who is Judicial Member of the ITAT, though was not agreed to by the other member, namely, B.R. Jain, Accountant Member, however, such observations, as the one made by the complainant in a judicial order are unacceptable. Further, the instructions issued by the complainant, in his capacity as senior member of the Tribunal to the Assistant Registrar, ITAT, Lucknow to obtain consent of the individual assessees in respect of the application moved by the opposite party No.1 regarding transfer of cases from Lucknow Bench to some other Bench, also does not appear to be a sound act on his part, if measured or judged on acceptable judicial standards;
S. 153(3) Expl 3/ 267: Benefit of extended period of limitation to pass assessment order pursuant to finding/ direction of appellate authority not available if affected party not heard
U/s 267, the CIT(A) and Tribunal are empowered, while making a change in the assessment of a body of individuals or an association of persons, to direct the AO to amend/ make a fresh assessment on any member of the body or association. Under Explanation 3 to s. 153(3), the time limit for making an assessment in such a case of finding or direction does not apply provided such other person was given an opportunity of being heard before the said order was passed. The opportunity of hearing to the assessee in whose hands income of the assessee in appeal is to be added is a condition precedent for giving any finding adverse to such assessee vis-à-vis the time limits for completion of his assessment, reassessment or recomputations are concerned. That is the unambiguous scheme of Explanation 3 to s. 153(3). If an appellate authority does not do so, the affected assessee can not be put to any disadvantage as far as the statutory time limits for completion of assessments, reassessment or recomputations. An opportunity to be so given should be a specific opportunity and the affected assessee is required to be put to notice on that issue. A general hearing given to the representative of the trusts in question cannot be equated with such specific opportunity to the affected assessee and the affected assessee being put to notice about the conclusions adversely affecting him. The scheme of the Income Tax Act fiercely guards the rule of finality to income tax proceedings, whether in assessment, reassessment, revisions, rectifications or any other proceedings, and once the time limit for that course of action is over, the finality thereto cannot be disturbed except under the specific provisions of the Act. The only thing which can help the cause of the revenue is thus a specific notice of hearing having been given to the assessee before us, as mandated by Explanation 3 to s. 153(3). It is only when the AO can demonstrate that this assessee was given a specific opportunity of hearing, before the appellate order was passed in the cases of the Trust that the impugned assessment order can be treated as legally valid
Assessee cannot be denied credit for TDS on the ground of discrepancy in Form 26AS filed by the deductor
Though Form 26AS (r/w r.31AB and ss. 203AA and 206C(5)) represents a part of a wholesome procedure designed by the Revenue for accounting of TDS (and TCS), the burden of proving as to why the said Form (Statement) does not reflect the details of the entire tax deducted at source for and on behalf of a deductee cannot be placed on an assessee-deductee. The assessee, by furnishing the TDS certificate/s bearing the full details of the tax deducted at source, credit for which is being claimed, has discharged the primary onus on it toward claiming credit in its respect. He, accordingly, cannot be burdened any further in the matter. The Revenue is fully entitled to conduct proper verification in the matter and satisfy itself with regard to the veracity of the assessee’s claim/s, but cannot deny the assessee credit in respect of TDS without specifying any infirmity in its claim/s. Form 26AS is a statement generated at the end of the Revenue, and the assessee cannot be in any manner held responsible for any discrepancy therein or for the non-matching of TDS reflected therein with the assessee’s claim/s. Where so, no doubt a matter of concern, is one which is to be investigated and pursued by the Revenue, which is suitably armed by law there for. The plea that the deductor may have specified a wrong TAN, so that the TDS may stand reflected in the account of another deductee, is no reason or ground for not allowing credit for the TDS in the hands of the proper deductee. The onus for the purpose lies squarely at the door of the Revenue
S. 271(1)(c): Fact that assessee has huge carry forward losses and depreciation and filed a nil return suggests that there is no motive or incentive to make a bogus claim in the return
Quantum additions and penalty proceedings are two separate and distinct proceedings. Penalty cannot be levied for every disallowance made in the assessment order. The assessee has submitted the agreement, debit note for these expenses, ledger account of APR Limited to whom the payments were made. Further, the confirmation from APR Limited was also filed in penalty proceedings. The revenue authorities have not brought anything on record which could prove the non-genuineness of these documents. The facts with regard to these claims were clearly mentioned and disclosed in the return of income. The expenses payable to APR Limited were shown separately by the assessee in the profit and loss account and the same has been also discussed by the auditor in the audit report. Thus, assessee has made a claim which was transparent and bona fide. Assessee has not concealed anything in this regard. Therefore, it cannot be a case of concealment of facts. As far as the filing of inaccurate particulars of income is concerned, the assessee was having huge carry forward losses and depreciation and the return was filed at nil income. In our considered view, there cannot be a motive or incentive for the assessee to make any bogus claim in the return of income. These facts show that whatever claim made by the assessee was under good faith and with the advice of the auditors and the employees. The assessee has furnished an explanation which has not been found false.
S. 2(47)(v): Transfer under a development agreement takes place on handing over possession. Capital gains are chargeable to tax even if no consideration is received by assessee
The assessee’s contention that no transfer takes place on the date of the agreement and handing over of possession if consideration is not received by the assessee is not acceptable because s. 53A of the Transfer of Property Act, 1882, which is engrafted in the definition of “transfer” in s. 2(47) of the Income-tax Act does not contemplate any payment of consideration. Payment of consideration on the date of agreement of sale is not required. It may be deferred for a future date. The element of factual possession and agreement are contemplated as transfer within the meaning of the aforesaid section. When the transfer is complete, automatically, consideration mentioned in the agreement for sale has to be taken into consideration for the purpose of assessment of income for the assessment year when the agreement was entered into and possession was given. Here, factually it was found that both the aforesaid aspects took place in the previous year relevant to the assessment year 2003-04. Hence, the Tribunal has rightly held that the appellant is liable to pay tax on the capital gain for the assessment year.
S. 2(47)(v): Despite handing over possession & receiving advance, development agreement is not a “transfer” for capital gains purposes if developer has not performed his part of the contract
A transaction is deemed to be a “transfer” u/s 2(47)(v) of the Act if the conditions of s. 53A of the Transfer of Property Act are satisfied. For s. 53A, ‘willingness to perform’ of the transferee is something more than a statement of intent; it is the unqualified and unconditional willingness on the part of the vendee to perform its obligations. Unless the party has performed or is willing to perform its obligations under the contract, and in the same sequence in which these are to be performed, it cannot be said that the provisions of s. 53A of the TOP Act will come into play. On facts, a reading of the ‘Development Agreement-cum-General Power of Attorney’ indicates that what was handed over by the assessee to the developer is only ‘permissive possession’. The agreement specifically provides that the assessee has permitted the developer to develop the land and that the consideration receivable by the assessee from the developer is ‘38% of the residential part of the developed area’. That being so, it is only upon receipt of such consideration in the form of developed area by the assessee in terms of the development agreement, the capital gains becomes assessable in the hands of the assessee. Further, the facts show that even as on date, there was no developmental activity on the land. The process of construction has not been even initiated and no approval for the construction of the building is obtained. This is due to lapse on the part of the transferee. While the assessee has fulfilled its part of the obligation under the development agreement, the developer has not done anything to discharge the obligations cast on it under the develop agreement. Mere receipt of refundable deposit cannot be termed as receipt of consideration. Consequently, s. 53A does not apply. As a result, there is no “transfer” u/s 2(47)(v) of the Act (Fibars Infratech, Vijaya Productions 134 ITD 19 (TM) followed, Chaturbhuj Dwarkadas Kapadia 260 ITR 491 (Bom) distinguished)
Expl to s. 73: Speculation loss on transactions in derivatives can be set off against the gains of delivery shares
Under the Explanation to s. 73 where any part of the business of a company consists in the purchase and sale of shares of other companies, such company shall, for the purposes of the section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. Therefore, the entire transaction carried out by the assessee was within the umbrella of speculative transaction. There was, as such, no bar in setting off the loss arising out of derivatives from the income arising out of buying and selling of shares.
A transfer of shares under a family arrangement is for a determinable “consideration” & is not “voluntary”. Consequently, the shares are not received under a “gift” & the transferee cannot claim benefit of cost, and holding period, of the transferor
(i) On the issue as to whether the shares received on family arrangement is pursuant to a “gift”, s. 122 of the Transfer of Property Act 1882 provides that a transfer of moveable or immovable property can be treated as a gift only if the same is made voluntarily and without any consideration. It cannot be said that a family arrangement is “without consideration”. In CWT vs. HH Vijayaba, Dowgner Maharani Saheb of Bhavnagar Palace 117 ITR 784 (SC) it was held that a family settlement or family arrangement which is to buy peace is for good consideration and creates an enforceable agreement between the parties. Consequently it cannot be said that a family arrangement is without consideration and a “gift”;
S. 14A disallowance cannot be made if the assessee has no tax-free income in the year
From the reading of s. 14A of the Act, it is clear that before making any disallowance the following conditions are to exist:- a) That there must be income taxable under the Act, and b) That this income must not form part of the total income under the Act, and c) That there must be an expenditure incurred by the assessee, and d) That the expenditure must have a relation to the income which does not form part of the total income under the Act. Therefore, unless and until, there is receipt of exempted income for the concerned assessment years (dividend from shares), s. 14A of the Act cannot be invoked (Hero Cycles 323 ITR 518 (P&H) and Winsome Textile 319 ITR 204 (P&H) followed)