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Month: October 2015

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DATE: September 11, 2015 (Date of pronouncement)
DATE: October 12, 2015 (Date of publication)
AY: 2002-03 to 2008-09
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CITATION:
Extrapolation: Fact that assessee admitted undisclosed income for one year does not mean that AO can assume that similar undisclosed income is earned in earlier years as well

The assessing officer did not bring any material on record to support his case of estimation of professional receipts of earlier years. We also notice that the assessing offer has assessed the net profit on the alleged suppressed professional receipts, meaning thereby, the assessing officer has presumed that the assessee would have suppressed corresponding expenses also. Again it is only a guess work only, unsupported by any material. Similarly, the average daily collection estimated by the AO was also mere guess work. In effect, there is no material available with the AO to show that the assessee has suppressed professional receipts as well as expenses in order to substantiate the estimation made by him

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DATE: September 11, 2015 (Date of pronouncement)
DATE: October 12, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 271(1)(c): If the notice does not clearly specify whether the penalty is initiated for "concealment" or for "filing inaccurate particulars", it is invalid. Penalty should not be imposed merely because the income has been offered to tax in a later year and not in the present year

The penalty notice issued u/s 274 of the Act is ambiguous to the extent for which the penalties are initiated. The said notice does not specify where the present penalty is being levied for concealment of income or for furnishing of inaccurate particulars of income. CIT (A) did not strike of The irrelevant limb mentioned in the notice u/s 274 of the Act. CIT (A) is not clear as to the relevant limb of the provisions of section 271(1)(c) of the Act for which penalty should be levied. Further, in the quantum order u/s 250 of the Act, the CIT (A) initiated penalty for assessee’s failure in furnishing inaccurate particulars in respect of estimated cost of future expenditure resulted in suppression of income. In the penalty order of the CIT (A), penalty was levied for “concealment of particulars of income‟ in respect of the change in estimated cost. By all these variations, the CIT (A) is not clear as to whether the penalties are levied for “concealment of income” or “furnishing of inaccurate particulars of income”

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DATE: October 6, 2015 (Date of pronouncement)
DATE: October 12, 2015 (Date of publication)
AY: 2002-03
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CITATION:
S. 10A/ 80HHE: Claiming deduction u/s 80HHE for one year does not debar the assessee from claiming deduction u/s 10A for another year. Fact that claim is not made via a revised return is no bar on the right of the appellate authority to consider it

Making of a claim under Section 80HHE of the Act in one assessment year will not preclude an Assessee from claiming the benefit under Section 10A of the Act in respect of the same unit in a succeeding assessment year. The purpose of the Section 80HHE(5) of the Act was to avoid double benefit but that would not mean that if for a particular assessment year the Assessee wants to claim a benefit only under Section 10A of the Act and not Section 80HHE, that would be denied to the Assessee

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DATE: September 2, 2015 (Date of pronouncement)
DATE: October 12, 2015 (Date of publication)
AY: 2007-08, 2008-09
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CITATION:
S. 271(1)(c): If the notice does not clearly specify whether the penalty is initiated for "concealment" or for "filing inaccurate particulars", it is invalid. Mere fact that assessee has surrendered income does not justify penalty if his explanation is not found to be false/ not bona fide

The notice issued by the AO u/s 274 read with section 271 of the Act at the time of initiation of penalty proceedings states that it is issued for “concealment of particulars of income or furnishing of inaccurate particulars of income”. The assessing officer has not specified that as to which limb the notice was issued, i.e., whether it is issued for concealment of particulars of income or furnishing of inaccurate particulars of income. The assessing officer should be clear about the charge at the time of issuing the notice and the assessee should be made aware of the charge. The penalty order is liable to be quashed as the AO has not correctly specified the charge

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DATE: September 28, 2015 (Date of pronouncement)
DATE: October 9, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 44BB: Service tax & Customs duty collected by assessee from clients is not includible in gross receipt while computing income u/s 44BB

The Court concurs with the decision of the High Court of Uttarakhand in DIT v. Schlumberger Asia Services Ltd (2009) 317 ITR 156 which held that the reimbursement received by the Assessee of the customs duty paid on equipment imported by it for rendering services would not form part of the gross receipts for the purposes of Section 44 BB of the Act. The Court accordingly holds that for the purposes of computing the ‘presumptive income’ of the assessee for the purposes of Section 44 BB of the Act, the service tax collected by the Assessee on the amount paid by it for rendering services is not to be included in the gross receipts in terms of Section 44 BB (2) read with Section 44 BB (1). The service tax is not an amount paid or payable, or received or deemed to be received by the Assessee for the services rendered by it. The Assessee is only collecting the service tax for passing it on to the government

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DATE: September 7, 2015 (Date of pronouncement)
DATE: October 9, 2015 (Date of publication)
AY: 2006-07
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CITATION:
S. 271(1)(c): The deeming provision of Explanation 1 to s. 271(1)(c) applies only to a case of "concealment of income" and not to a case of "furnishing inaccurate particulars of income"

There are two different charges i.e. concealment of particulars of income or furnishing of inaccurate particulars of income. The penalty can be imposed only for a specific charge. Furnishing inaccurate particulars of income means, when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect whereas, concealment of particulars of income means, when the assessee has concealed the income and has not shown the income in its return or in its books of accounts. Explanation 1 is a deeming provision and is applicable when an amount is added or disallowed in computation of total income which is deemed to represent the income in respect of which particulars have been concealed. Explanation 1 cannot be applied in a case where the assessee furnishes inaccurate particulars of income

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DATE: September 28, 2015 (Date of pronouncement)
DATE: October 9, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 48: In computing "capital gains" the AO is not entitled to substitute the "market value" for the actual "consideration" received by the assessee. He also cannot disregard the valuation report without cogent material

It is settled position of law that in the case of sale, the Assessing Officer has no power to replace the value of the consideration agreed between the parties. A report of a valuer is an important piece of evidence and the same cannot be discarded without there being any cogent material on record showing that the report of the valuer is not correct

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DATE: September 23, 2015 (Date of pronouncement)
DATE: October 8, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A/ Rule 8D: (i) Presumption laid down in HDFC Bank 366 ITR 505 (Bom) and Reliance Utilities 313 ITR 340 (Bom) that investments in tax-free securities must be deemed to have come out of own funds and (ii) Law laid down in India Advantage (Bom) that s. 14A and Rule 8D does not apply to securities held as stock-in-trade cannot be applied as both propositions are contrary to Godrej & Boyce 328 ITR 81 (Bom)

In our view, it was incumbent on the parties to have brought its’ decision in the case of Godrej & Boyce to the notice of the Hon’ble Court in HDFC Bank Ltd.. We are conscious that we are deciding an appeal in the case of the same assessee. So, however, we are deciding a purely legal issue, i.e., whether, in view of the statutory presumption cast by section 14A, a non obstante provision, a presumption on facts could obtain, or that the assessee shall have to establish the same with reference to its accounts, in terms of section 14A(2) r/w s. 14A(3), leading to a satisfaction or otherwise of the assessing authority, arrived at objectively, only to find the earlier decision in Godrej & Boyce (supra) as having addressed the said issue. Further, that the facts in Reliance Utilities and Power Ltd., which was even otherwise in respect of allowance of expenditure u/s.36(1)(iii) – a provision which does not mandate any apportionment per se, stood established, with in fact the said decision having been considered in Godrej & Boyce. As such, there being no estoppel against law, we consider ourselves as legally justified in following the said decision by the Hon’ble jurisdictional High Court, address as it does, in our opinion, the issue at hand, and is thus squarely applicable, even as found in Dhanuka & Sons (supra), D. H. Securities (P) Ltd. (supra); and Damani Estates & Finance (P.) Ltd. (supra). These also constitute the binding reasons for not following the decision by the tribunal in Dy. CIT (OSD) vs. Shri Durga Capital Ltd. (in ITA No. 7405/Mum/2011 dated 03.08.2015/copy on record), also relied upon before us, in-as-much as we find no statement of law ascribed to India Advantage Securities Ltd. (supra); the Hon’ble Court therein holding the appeal before it to not raise any substantial question of law. Further, there is, no reference to the binding decision by the Hon’ble jurisdictional High Court in Godrej & Boyce (supra), or by the tribunal in D. H. Securities (P) Ltd. (supra) as well as Damani Estates & Finance (P.) Ltd. (supra), explaining the said decision, as well as its bearing on the decision by the larger bench of the tribunal in Daga Capital Management Pvt. Ltd. (infra), in Shri Dura Capital Ltd

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DATE: September 24, 2015 (Date of pronouncement)
DATE: October 8, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 14A/ Rule 8D cannot be automatically invoked. It cannot be invoked if the AO does not record satisfaction as to why the assessee’s voluntary disallowance is not proper

The Court disapproves of the AO invoking Section 14A read with Rule 8D (2) of the Rules without recording his satisfaction. The recording of satisfaction as to why “the voluntary disallowance made by the assessee was unreasonable and unsatisfactory” is a mandatory re-quirement of the law

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DATE: September 24, 2015 (Date of pronouncement)
DATE: October 8, 2015 (Date of publication)
AY: 1994-95
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CITATION:
Entire law on whether leasehold rights constitute a "capital asset" u/s 2(14), whether there is a "transfer" u/s 2(47) of such rights and whether "capital gains" u/s 45 can arise explained in detail

The Court is unable to agree with the above approach of the ITAT to interpreting what appear to be plain and unambiguous provisions of the Act. It is useful to recall that this entire discussion is in the backdrop of what constitutes “transfer” in relation to a capital asset. Further, the entire exercise is for ultimately determining if there has been any capital gains arising from the transaction. Under Section 45(1) ‘capital gains’ are any profits or gains arising from the transfer of a capital asset effected in the previous year. When the word “transfer” itself has been defined under Section 2(47) (vi) and by virtue of Explanation 1 “shall” have the same meaning as Section 269UA(d) then it is not possible to ‘restrict’ Explanation 1 to only those transactions described in Chapter XXC. Explanation 1 is a deeming fiction and incorporates by way of reference the provisions of Section 269 UA (d) in order to understand the meaning of the word ‘transfer’ for the purposes of Section 2 (47) (vi). Therefore, that entire scheme has to be given effect to. In other words, it is not possible to omit the reference to Section 269UA(d) (i) which in turn brings in Section 269UA(f) (i). The ITAT has therefore erred in conveniently choosing to not apply the Explanation 1 to Section 2 (47) in order to arrive at the conclusion there was indeed a ‘transfer’ of a capital asset brought about by the lease agreement in question

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