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DATE: May 13, 2016 (Date of pronouncement)
DATE: May 19, 2016 (Date of publication)
AY: 2007-08
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CITATION:
S. 271(1)(c) penalty on Bogus Purchases: If the assessment order in the quantum proceedings is altered by an appellate authority in a significant way, the very basis of initiation of the penalty proceedings is rendered non-existent and the AO cannot continue the penalty proceedings on the basis of the same notice

Once the assessment order of the AO in the quantum proceedings was altered by the CIT (A) in a significant way, the very basis of initiation of the penalty proceedings was rendered non-existent. The AO could not have thereafter continued the penalty proceedings on the basis of the same notice. Also, the Court concurs with the CIT (A) and the ITAT that once the finding of the AO on bogus purchases was set aside, it could not be said that there was any concealment of facts or furnishing of inaccurate particulars by the Assessee that warranted the imposition of penalty under Section 271 (1) (c) of the Act

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DATE: March 18, 2014 (Date of pronouncement)
DATE: May 17, 2016 (Date of publication)
AY: 2006-07
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CITATION:
Inability of the assessee, an Advocate, to reconcile the professional receipts with the TDS certificates and to give a detailed party-wise breakup of fees receipts does not mean that the difference can be assessed as undisclosed income

The assessee was engaged as an Advocate to argue the matters by what is popularly known as Advocates on record or instructing Advocates method, meaning thereby the client does not engage the assessee directly but a professional or the Advocate engaged by the client requests the assessee to argue the case. The brief is then taken as the counsel brief. That being the practice, the assessee gave an explanation that the breakup as desired cannot be given and with regard to all payments. It is pointed out that at times, assessee receives fees directly from the clients or from the instructing Advocates or Chartered Accountants if such professionals have collected the amounts from the clients. Under these circumstances, the breakup as desired cannot be placed on record

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DATE: April 6, 2016 (Date of pronouncement)
DATE: May 17, 2016 (Date of publication)
AY: -
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CITATION:
S. 143(2)/ 245R(2): A notice u/s 143(2)(ii) cannot be issued in a routine, casual or mechanical manner but after forming an opinion that it is "necessary or expedient" to do so. A S. 143(2) notice in the standard form is not a bar u/s 245R(2) for admission of an AAR application for advance ruling

Under Section 143 (2) (ii) of the Act, an AO can serve on the Assessee a notice requiring him to attend his office and produce any evidence on which the Assessee seeks to rely in support of return if the AO “considers it necessary or expedient to ensure that the Assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner’. Therefore, the scope of the enquiry that an AO can undertake in terms of Section 143 (2) (ii) is a wide ranging one. What is relevant for the present case is that prior to issuance of the notice under Section 143 (2) (ii) the AO has to form an opinion that it is ‘necessary or expedient’ to ensure that an Assessee has not (i) understated the income or (ii) has not computed excessive loss, or (iii) has not underpaid the tax in any manner. The AO is, therefore, not expected to issue a notice under Section 143 (2) (ii) in a routine or casual or mechanical manner

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DATE: May 11, 2016 (Date of pronouncement)
DATE: May 16, 2016 (Date of publication)
AY: 2001-02
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CITATION:
S. 263: Even if AO applies mind and decides not to assess expenditure as unexplained u/s 69C because the assessee withdrew the claim for deduction, the CIT is entitled to revise the assessment on the ground that the matter needed further investigation

There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. However, the above is not the situation in the present case in view of the reasons stated by the learned C.I.T. on the basis of which the said authority felt that the matter needed further investigation, a view with which we wholly agree. Making a claim which would prima facie disclose that the expenses in respect of which deduction has been claimed has been incurred and thereafter abandoning/withdrawing the same gives rise to the necessity of further enquiry in the interest of the Revenue

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DATE: May 6, 2016 (Date of pronouncement)
DATE: May 16, 2016 (Date of publication)
AY: -
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CITATION:
Transfer Pricing: High Court irked at fact that Dept is unaware of which of its matters are admitted/ dismissed. Chief CIT directed to streamline the procedure for filing appeal before the High Court. Adjustment can be made only for transactions attributable to the International taxation

This appeal filed by the Revenue raises questions with regard to whether transfer pricing adjustment consequent to arriving at Arms Length Price (ALP) is required to be done only in respect of the international transactions or this adjustment is to be done in respect of all the business transactions of the assessee i.e. at the entity level. This Appeal was on board and detailed orders were passed indicating that the Revenue has not been bringing to the notice of the Court orders of admission in its favour in the subsequent Appeals filed by it an identical questions. This has resulted in the subsequent appeals filed by the Revenue raising identical questions being dismissed at the stage of admission after having heard the parties at some length

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DATE: May 13, 2016 (Date of pronouncement)
DATE: May 16, 2016 (Date of publication)
AY: 2001-02
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CITATION:
S. 40(a)(i): The law in s. 40(a)(i) that failure to deduct TDS on payment to a non-resident will result in a disallowance violates the non-discrimination clause in Article 26 of the India-USA DTAA because a similar disallowance is not made on payments to residents (pre s. 40(a)(ia))

The argument of the Revenue overlooks the fact that the condition under which deductibility is disallowed in respect of payments to non-residents, is plainly different from that when made to a resident. Under Section 40 (a) (i), as it then stood, the allowability of the deduction of the payment to a non-resident mandatorily required deduction of TDS at the time of payment. On the other hand, payments to residents were neither subject to the condition of deduction of TDS nor, naturally, to the further consequence of disallowance of the payment as deduction. The expression “under the same conditions” in Article 26 (3) of the DTAA clarifies the nature of the receipt and conditions of its deductibility. It is relatable not merely to the compliance requirement of deduction of TDS. The lack of parity in the allowing of the payment as deduction is what brings about the discrimination

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DATE: May 13, 2016 (Date of pronouncement)
DATE: May 16, 2016 (Date of publication)
AY: 2010-11
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CITATION:
S. 50C/ 54F: In allowing exemption u/s 54F, the deemed consideration u/s 50C has to be taken into consideration and it cannot be restricted to the consideration mentioned in the sale deed

The ultimate object and purpose of section 50C of the I.T. Act is to see that the undisclosed income of capital gains received by the assessee should be taxed and that the law should not encourage and permit the assessee to peg down the market value at their whims and fancy to avoid tax, but when the capital gain is assessed on notional basis, whatever amount is invested in the new residential house within the prescribed period under section 54 of the I.T. Act, the entire amount invested, should get benefit of deduction irrespective of the fact that the funds from other sources are utilised for new residential house

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DATE: April 19, 2016 (Date of pronouncement)
DATE: May 7, 2016 (Date of publication)
AY: 1989-90
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CITATION:
S. 5/ 147: Even if income by way of rent is enhanced with retrospective effect, it accrues only when a right to receive the income is vested in the assessee. A notice u/s 148 seeking to assessee the income prior to its accrual is without jurisdiction

A reading of the decision of this Court in E.D. Sassoon (supra) would go to show that the income to be chargeable to tax must accrue or arise at any point of time during the previous year. This Court in E.D. Sassoon (supra) has held in categorical terms that income can be said to have accrued or arisen only when a right to receive the amount in question is vested in the assessee. Viewed from the aforesaid perspective, it is clear that no such right to receive the rent accrued to the assessee at any point of time during the assessment year in question, inasmuch as such enhancement though with retrospective effect, was made only in the year 1994. The contention of the Revenue that the enhancement was with retrospective effect, in our considered view, does not alter the situation as retrospectivity is with regard to the right to receive rent with effect from an anterior date. The right, however, came to be vested only in the year 1994

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DATE: May 4, 2016 (Date of pronouncement)
DATE: May 7, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Transfer pricing of AMP Expenditure: In the case of a manufacturer operating in a competitive industry, high AMP expenditure cannot be assumed to have been incurred for the benefit of the brand owner. The TPO has to prove that the real intention of the assessee in incurring AMP expenses was to benefit the AEs and not to promote its own business. Also, if the assessee has reported high turnover & profits & offered to tax, the basic ingredient required to invoke s. 92 that there is transfer of profit from India remains unproved. In the absence of the AO/ TPO showing that there is a formal/ informal agreement to share the AMP expenditure, the adjustment cannot be made. The matter cannot be remanded to the AO/ TPO for reconsideration

In these circumstances, the fundamental question to be answered is to decide as to whether in absence of any agreement for payment of AMP expenses by the AEs can it be held that there was an international transaction only on the basis that AMP expenditure, incurred by the assessee, would have benefitted the AEs, who owned the brands used by the assessee. In our opinion, the arguments suffers from the very basic flaw that it presumes that the assessees would incur AMP not to promote its own business. In other words, the TPO has failed to prove that the real intention of the assessee in incurring advertisement and marketing expenses were to benefit the AEs and not to promote its own business. The turnover of the assessee proves that during the year under consideration the assessee had done a reasonably good business, as stated earlier. The resultant profit was offered for taxation in India. Therefore, transferring of profit from India, the basic ingredient to invoke the provisions of section 92 of the Act, remains unproved

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DATE: May 2, 2016 (Date of pronouncement)
DATE: May 7, 2016 (Date of publication)
AY: 2006-07, 2007-08, 2008-09
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CITATION:
S. 92(2): Important principles of law laid down with regard to the “Need Test”, “Evidence Test” or “Rendition Test” to evaluate the ALP of intra-group services rendered by an Associated Enterprise and whether the TPO has the right to determine the ALP at ‘Nil’

Rendering of services must be seen from the view point of the assessee and further assessee cannot be asked to keep and maintain evidences of services rendered by AE higher than which is expected from a businessman receiving services from an unrelated provider. Therefore, we reject the view point of Ld. TPO and Ld. DRP that assessee has not shown the receipt of the services. In view of above we are of the view that assessee has justified the receipt of services and satisfied the rendition test

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