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Month: August 2019

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DATE: June 14, 2019 (Date of pronouncement)
DATE: August 14, 2019 (Date of publication)
AY: 2014-15
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CITATION:
S. 10(38) Bogus Capital Gains from Penny Stocks (282x gain in 12 months): The meticulous paper work of routing the transaction through banking channel is futile because the results are altogether beyond human probabilities. Neither in the past nor in the subsequent years, assessee has indulged into any such investment having huge windfall. Had the assessee been so intelligent qua the intricacies of the share market, he would have definitely undertaken such risk taking activities in the past or future by making such investment in unknown stock. It is a sham transaction to convert undisclosed income into disclosed by evading tax under the garb of LTCG in connivance with entry providers (Pooja Ajmani & Udit Kalra 176 DTR 249 (Del) followed

The contention of the assessee that he has purchased the shares through banking channel and as such, when the purchase is genuine then sale cannot be questioned, is not tenable because the entire transaction of sale and purchase is to be seen in entirety in the light of the attending circumstances particularly when share of Rs.10 is sold after a period of one year at 282 times which is otherwise improbable in the ordinary course of business.

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DATE: August 2, 2019 (Date of pronouncement)
DATE: August 10, 2019 (Date of publication)
AY: 2007-08, 2008-09
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CITATION:
S. 68 Bogus Share Capital Premium: The test of human probabilities cannot be applied to business transactions. Share premium is collected as per the understanding between the parties. The AO cannot treat the share premium as unexplained cash credit only because the same is not commensurate with the income and financial strength of the assessee. The AO cannot reach this conclusion without further investigation and bringing material on record (All imp judgements referred)

The share premium has been collected as per the understanding reached between both the parties. We notice that the AO has not mentioned in the assessment order that the assessee has failed to satisfy the three main ingredients in the context of sec.68 of the Act. His only case was that the assessee did not substantiate the quantum of share premium collected. We have noticed that the assessee has furnished a valuation report in order to justify the share premium, even though the same has been rejected by the AO. However, the important point is that the doubt of the assessing officer on the quantum of share premium cannot be a ground for making addition u/s 68 of the Act.

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DATE: July 29, 2019 (Date of pronouncement)
DATE: August 3, 2019 (Date of publication)
AY: -
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CITATION:
S. 197/ Rule 28AA TDS: An order u/s 197 is quasi-judicial & must be supported by valid & cogent reasoning. It has to be based on objective criteria and relevant material. On facts, there is arbitrariness and non-application of mind at various levels which vitiates the certificate. The reasons do not conform to the requirement of s. 197 r. w. Rule 28 AA. The settled legal position is that orders passed by a statutory authority under "dictation" of a superior officer or anyone else is bad in law

The Court accordingly finds that in the present case the impugned withholding certificate which directs TDS to be deducted at 5% on the payments made by the Indian entities to the Petitioner is unsustainable in law, inasmuch as it is not based on valid reasons and is contrary to the legal requirement spelt out in Section 197(1) of the Act read with Rule 28AA of the Rules. The impugned certificate is hereby quashed

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DATE: July 12, 2019 (Date of pronouncement)
DATE: August 3, 2019 (Date of publication)
AY: -
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CITATION:
The Benami Amendment Act, 2016, amending the Benami Act, 1988, comes into force on 01.11.2016 and does not have retrospective effect. Unless a contrary intention is reflected, every legislation is presumed and intended to be prospective. In the normal course of human behavior, one is entitled to arrange his affairs keeping in view the laws for the time being in force and such arrangement of affairs should not be dislodged by retrospective application of law. The High Court can strike down wrong exercise of jurisdiction u/A 226, 227 individual to save individuals from lengthy proceedings and unnecessary harassment

For the reason aforesaid and in the backdrop of the settled legal proposition so also in view of singular factual matrix of the matters herein; this Court has no hesitation to hold that the Benami Amendment Act, 2016, amending the Principal Benami Act, 1988, enacted w.e.f. 1st November, 2016, i.e. the date determined by the Central Government in its wisdom for its enforcement; cannot have retrospective effect

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DATE: May 13, 2019 (Date of pronouncement)
DATE: August 3, 2019 (Date of publication)
AY: 2010-11
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CITATION:
Suppression of profit/ fictitious loss in stocks/ derivatives by way of Client Code Modification (CCM): CCM within 1% is absolutely normal. By no stretch of imagination can any AO consider a transaction on the Stock Exchange as income of a person other than the one who has either actually received monies in his bank account (in case of profit) and/or paid any monies from his bank account (in case of losses). The AO has to show that the losses were purchased and the party was given cheque or cash payment in view of such favours

The broker, through whom the assessee carried on share transactions, were also not imposed any penalty. No co-relation between the assessee on the one hand and the other parties on the other hand has been brought on record to co-relate that the parties to whom the alleged profits or loss is supposed to have been diverted to reduce the taxable income of the assessee, has been brought on record to show that there was any collusion with each other and were known to each, so that one party diverted its profit or loss to the other parties. Even nothing has been brought on record to suggest that the said losses were purchased and the party were given cheque or cash payment in view of such favour

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DATE: July 17, 2019 (Date of pronouncement)
DATE: August 3, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 56(2)(vii): The stand of the Dept that in the case of an individual, a "HUF" is not a "relative" and that while a gift by the individual to the HUF is exempt, a gift from the HUF to its member is taxable u/s 56(2)(vii) is not correct. S. 56 (2) (vii) provides that the members of the 'HUF' are to be taken as "relatives". The converse is not provided because on first principles, amounts received by a member from the 'HUF' cannot be said to be income of the member exigible to taxation. Terming by the PCIT of decisions of the Tribunal as "incorrect" tantamounts to judicial indiscipline and will lead to chaos

As per the provisions of section 56 (2) (vi i) of the Act , though the members of the ‘HUF’ are to be taken relatives of the ‘HUF’ for the purpose of the said sect ion, however, the converse is not true that is to say that ‘HUF’ is not a relative of the individual member as per meaning of relative given in the case if individual under explanation to sect ion 56(2)(vi i) of the Act

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