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DATE: March 20, 2017 (Date of pronouncement)
DATE: April 7, 2017 (Date of publication)
AY: 2008-09
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CITATION:
Bogus share capital/ premium: The proviso to s. 68 (which creates an obligation on the issuing Co to explain the source of share capital & premium) has been introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have retrospective effect. Prior thereto, as per Lovely Exports 317 ITR 218 (SC), if the AO regards the share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company's unexplained cash credit

The proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced “for removal of doubts” or that it is “declaratory”. Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso

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DATE: March 10, 2017 (Date of pronouncement)
DATE: April 7, 2017 (Date of publication)
AY: 2006-07
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CITATION:
(i) Additional Evidence: Ordinarily an application seeking admission of additional evidence under Rules 18 and 29 of ITAT Rules requires an order to be passed. If the ITAT rejects the application, reasons thereof have to be stated.

(ii) S. 54F: The allotment letter issued by the developer does not confer title until the agreement for sale under the provisions of the MOFA is registered. Failure to deposit the amount of consideration not utilized towards the purchase of new flat in the specified bank account before the due date of filing return of Income u/s 139(1) is fatal to the claim for exemption. Humayun Suleman Merchant vs. CCIT is not per incuriam

In the fact situation at hand we are afraid the assessee can derive no benefit from the provisions of circular No.672 dated 16th December, 1993 inasmuch as the scheme contemplated in paragraph 2 of circular No.471 is not available to the appellant. The appellant has to obtain the allotment letter from the developer under the provision of Maharashtra Ownership of Flats Act, 1963 (MOFA) and not from the co-operative society. The allotment letter issued by the developer does not confer title until the agreement for sale under the provisions of the MOFA is registered. In the present case, however, it is not in dispute that the agreement for sale was entered into only on 24th November, 2008 beyond the period of three years from the date of surrender of tenancy which was 13th September, 2005. Moreover, the developer had no approval for construction of the 9th floor of Wing ‘C’, wherein the assessee had booked three flats and such approval was received by the builders only on 7th September, 2010. Thus, according to us there is no question of assessee establishing the title over the property which was not been approved for construction at the material time

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DATE: April 4, 2017 (Date of pronouncement)
DATE: April 7, 2017 (Date of publication)
AY: 2009-10
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CITATION:
Bogus Purchases: If the assessee has not discharged the onus of producing the documentation and the suppliers, the AO is entitled to estimate the gross profit. The GP estimate should be fair, honest and rational and cannot be arbitrarily applied at the discretion of the AO. Industry comparisons or other rational comparability vis-à vis preceding years GP ratio should be brought on record. The books should be rejected. On facts, GP ratio of 12.5% as applied in Simit P Sheth 356 ITR 451(Guj) is fair, reasonable and rational after giving credit for the GP already declared

The authorities below in the instant case did not made any industry comparisons to arrive at fair, honest and rational estimation of GP ratio, rather applied GP ratio of 12.5% on alleged bogus purchases which estimation was in addition to the normal GP ratio declared by the assessee in return of income filed with Revenue. The Revenue made aforesaid additions relying on the presumption that the material was in-fact purchased from grey market at a lower rate and to cover deficiencies in record, the invoices were procured from these entry operators to reduce the profit. It was also considered that there will be savings on account of taxes while procuring material from grey market. The authorities below relied upon decision of Hon’ble Gujarat High Court in the case of Simit P Sheth (2013) 356 ITR 451(Guj HC), which has estimated disallowance @12.5% of the disputed bogus purchases to meet the end of justice. The authorities below has not brought on record industry comparables nor any rational comparability vis-à vis preceding years GP ratio are brought on record. There is no allegation brought on record by learned DR that similar additions were also made in the immediately preceding year

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DATE: March 9, 2017 (Date of pronouncement)
DATE: April 7, 2017 (Date of publication)
AY: 2008-09
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CITATION:
Bogus penny stock capital gains: Failure to provide a copy of the statement relied upon and of cross-examination renders the assessment order void. The claim of capital gains from penny stocks cannot be denied on presumption and surmises by disregarding direct evidences relating to the sale/purchase transactions of shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account

There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn

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DATE: March 21, 2017 (Date of pronouncement)
DATE: April 5, 2017 (Date of publication)
AY: -
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CITATION:
S. 132/ 158BC, 158BD: The fact that the search was invalid because the warrant was in the name of a dead person does not make the s. 158BC/158BD proceedings invalid if the assessee participated in them. Information discovered in the search, if capable of generating the satisfaction for issuing a s. 158BD notice, cannot altogether become irrelevant because the search is invalid

The point urged before us, shortly put, is that if the original search warrant is invalid the consequential action under Section 158BD would also be invalid. We do not agree. The issue of invalidity of the search warrant was not raised at any point of time prior to the notice under Section 158BD. In fact, the petitioner had participated in the proceedings of assessment initiated under Section 158BC of the Act. The information discovered in the course of the search, if capable of generating the satisfaction for issuing a notice under Section 158BD, cannot altogether become irrelevant for further action under Section 158BD of the Act

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DATE: March 21, 2017 (Date of pronouncement)
DATE: April 5, 2017 (Date of publication)
AY: 1989-90, 1990-91
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CITATION:
S. 132: It is but natural that concealed income found at the time of search and survey has to be distributed among all the family members who were carrying on business. It is also a reasonable conclusion that the income had been earned over a period of time and should be spread over various years

The Department has failed to bring on record any material to the contrary except the seized documents which, in our considered opinion, could not absolve the Department or give any right to negate the view taken by the first Appellate Authority and the Tribunal. So far as the income divided among the family members of the assessee is concerned, we find that all of them were carrying on same business from the same premises. Therefore, it is but natural that if any concealed income has been found at the time of search and survey, it has to be distributed among all the family members who were carrying on business

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DATE: March 30, 2017 (Date of pronouncement)
DATE: March 31, 2017 (Date of publication)
AY: -
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Strike by Advocates: Giving a call to protest when the Bill is still at a draft stage is premature. Wisdom has to prevail on the Advocates in the light of the law laid down in Harish Uppal AIR 2003 SC 739. The law laid down by the Supreme Court is binding on the Advocates as well under Article 141 of the Constitution. The lawyers' community has to appreciate their responsibility in discharging the duties of their profession

If one has to understand the implication or consequences of abstaining from work in general terms, the strike would mean abstaining from work apart form other meanings. It is nothing but demonstration of protest against the suggestions or resolution denying in line with the demand. It can also mean temporary stoppage of activities in protest against any act or a condition imposed. Petitioners’ counsel also rely upon the order dated 5th December 2016 passed in Contempt Petition (C) No.19/2016 in Writ Petition (C) No.132/1988 (Prem Prakash Panigrahi v. Md.Shabbir Ahmed and others) on the file of the Apex Court so also the judgment of the Division Bench of this Court dated 27th October 2014 passed in PIL No.75/2014 (Adv.Manoj Laxman Shirsat v. Bar Council of Maharashtra and Goa). The observations in the case of Capt. Harish Uppal v. Union of India (supra) indicate that the proceedings inside the Court are always expected to be held which commands confidence of the public in the efficacy of the institution of the Courts. In the said decision, the Apex Court has also referred to the duties, obligations, responsibilities and the divine work of the community of the lawyers while discharging their professional duties

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DATE: March 28, 2017 (Date of pronouncement)
DATE: March 30, 2017 (Date of publication)
AY: 1996-97, 1997-98
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CITATION:
S. 35D: Premium collected by a company on subscribed share capital is not “capital employed in the business of the Company" within the meaning of s. 35D so as to enable the claim of deduction of the said amount as prescribed u/s 35D

Capital employed in the business of the company is the aggregate of three distinct components, namely, share capital, debentures and long term borrowings as on the dates relevant under sub-clauses(i) and (ii) of Clause(b) of the explanation extracted above. The term ‘long term borrowing’ has been defined in clause (c) to the explanation. It is nobody’s else that the premium collected by the Company on the issue of shares was a long term borrowing either in fact or by a fiction of law. It is also nobody’s case that the premium collected by the Company was anywhere near or akin to a debenture. What was all the same argued by the counsel for the appellant was that premium was a part of the share capital and had therefore to be reckoned as ‘capital employed in the business of the company’. There is, in our view, no merit in that contention

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DATE: March 8, 2017 (Date of pronouncement)
DATE: March 30, 2017 (Date of publication)
AY: 2005-06
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CITATION:
S. 68 bogus gains from penny stocks: If the AO relies upon the statement of a third party to make the addition, he is duty bound to provide a copy of the statement to the assessee and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the D-mat account, etc cannot be treated as a bogus transaction so as to attract s. 68

It is also very strange that the FAA, being a judicial authority, has held that non providing opportunity of cross examination would not vitiate the assessment proceedings. If the AO/assessee wants to rely upon the statements of someone it is their duty to prove the truthfulness of such statements. Filing of affidavits/cross examination of the person making assertion can be means of verifying the genuineness of the statements. There can be other means also. But, the basic principles remain the same-person relying upon statement of someone has to prove it and especially when it is challenged by another party

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DATE: March 9, 2017 (Date of pronouncement)
DATE: March 23, 2017 (Date of publication)
AY: 2007-08
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CITATION:
S. 271(1)(c): A disclosure of income, or withdrawal of claim for deduction, by the assessee after a specific s. 142(1)/ 143(2) notice is issued cannot be said to be a "voluntary disclosure" so as to avoid the levy of penalty. The argument that the earlier non-disclosure of income/ wrong claim for expenditure was due to "mistake" is not an acceptable defense (Mak Data 358 ITR 593 (SC) followed, Price Waterhouse Coopers 348 ITR 306 (SC) distinguished)

It is clear that so called mistake as claimed by the assessee, was only after notices dated 14th January, 2009 were issued under Sections 142 and 143 of the Act. It was only an attempt to preempt the Revenue finding out the assessee had furnished inaccurate particulars. Therefore, it cannot be said that it was voluntary disclosure.

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