S. 153A: Addition in a search assessment for a AY which is not pending can be made only if incriminating material is found during search

(i) The language of s. 153A has been structured in such a way so as not to permit the making of addition for the assessment year of which the assessment is not pending as on the date of search, without there being any incriminating material found during the course of search. It is manifest that a duty is cast on the AO to determine the ‘total income’ of the assessee for such six assessment years. ‘Total income’ refers to the sum total of income in respect of which a person is assessable and covers not only the income emanating from declared sources or any material placed before the AO but from all sources including the undeclared ones. However, the second proviso to s. 153A(1) eclipses the afore discussed determination of ‘total income’ by mandating that while pending assessments relating to any assessment year falling within the period of six years shall abate and that completed assessments shall remain intact. The effect of the second proviso in the entire setting of section is that the assessment for any assessment year which is not pending as on the date of search cannot include an item of income for which no incriminating material was found

S. 40(a)(ia): If an amount is made taxable by a retrospective amendment, the payer cannot be held liable to deduct TDS on a payment made earlier and to suffer disallowance u/s 40(a)(ia)

In view of the retrospective insertion of Explanation 6 by the Finance Act, 2012, the payment made by the assessee as “Pay Channel Charges” constitutes “royalty” as defined in clause (i) of Explanation 2 to s. 9(1) of the Act. However, as the decision of the assessee not to deduct TDS was supported by Asia Sat, the assessee cannot be held to be liable to deduct tax at source by relying on the subsequent amendments made in the Act with retrospective effect (Channel Guide 139 ITD 49 (Mum), Sonata Information Technology & Infotech Enterprises followed)

ITAT issues strictures against AO & CIT & fines them for filing a frivolous appeal

The ITO, the Appellant, as well as the CIT, who has authorised the AO to prefer an appeal, did not apply their mind in the correct perspective and in a very lacklustre and routine manner filed the appeal which, in turn, resulted in wastage of time of the court … At this juncture it may be noticed that the power is vested in the CIT and not with the AO because the Legislature, in its wisdom, thought that a superior/ senior officer can take a more balanced decision so as to avoid filing frivolous appeals in routine manner. However, even the CIT has not given his reasons as to why he has authorised the AO to file an appeal on this issue…. we are of the firm view that the AO has raised a soulless ground which deserves to be dismissed in limine. We could have saved a lot of time had the CIT not given his authorisation on such frivolous issues. On the contrary, it is incumbent upon the Commissioner, as a supervisory authority, to admonish the AO for making an addition without basic understanding of legal position…. this is a peculiar case where even the CIT (Admin) who is supposed to supervise the proper functioning of the AO, under his charge, has allowed him to file appeals without properly examining the assessment order and the order of the CIT(A), which results in unnecessary expenditure to the assessee when appeal is filed by the Revenue and the assessee had to undergo the trauma of engaging counsel and paying substantial fees to defend the case when the Revenue has no case at all … Therefore we award a token cost of Rs. 5,000 upon the CIT who has given the authorisation and cost of Rs. 10,000 upon the AO who has filed this appeal… The said payment should be made to the assessee within one month from the date of receipt of this order. Registry is also directed to mark a copy to the Chairman, CBDT so that in future the Income Tax Commissioners, who are responsible for filing appeal before the Tribunal, would take proper care to scrutinise the issues before authorising the AO to file appeals before the Tribunal

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)

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.