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Year: 2019

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DATE: May 16, 2019 (Date of pronouncement)
DATE: June 19, 2019 (Date of publication)
AY: 2009-10
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CITATION:
Bogus Purchases: The CIT(A) is not justified in enhancing the assessment to disallow 100% of the bogus purchases. The only addition which can be made is to account for profit element embedded in the purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases (PCIT vs. Mohommad Haji Adam (Bom HC) followed

The assessee was in possession of primary purchase documents and the payments to the suppliers was through banking channels. The assessee had established corresponding sales before Ld. AO. The books of accounts were audited wherein quantitative details of stock was provided. We are of the considered opinion that there could be no sale without actual purchase of material keeping in view the fact that the assessee was engaged in trading activities. At the same time, the assessee failed to produce even a single supplier to confirm the purchase transactions. The delivery of material could not be substantiated.

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DATE: February 5, 2019 (Date of pronouncement)
DATE: June 8, 2019 (Date of publication)
AY: -
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CITATION:
S. 9(1)(vi) 'Royalty': The insertions of Explanations 5 & 6 to s. 9(1)(vi) by the Finance Act 2015 w.r.e.f. 01.04.1976, even if declaratory and clarificatory of the law, will not apply to the DTAAs. The DTAAs are a bilateral agreement between two Countries and cannot be overridden by a unilateral legislative amendment by one Country (New Skies Satellite BV 382 ITR 114 (Del) & Siemens AG 310 ITR 320 (Bom) followed)

India’s change in position to the OECD Commentary cannot be a fact that influences the interpretation of the words defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty.

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DATE: May 10, 2019 (Date of pronouncement)
DATE: June 8, 2019 (Date of publication)
AY: 2016-17
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CITATION:
S. 9(1)(vi) Royalty: Payment for 'bandwith services' is not assessable as 'royalty' if the assessee only has access to services and not to any equipment. The assessee also did not have any access to any process which helped in providing of such bandwith services. All infrastructure & process required for provision of bandwith services was always used and under the control of the service provider and was never given either to the assessee or to any other person availing the said services

The assessee pursuant to the terms of the “agreement‟ had only received standard facilities i.e bandwith services from RJIPL. In fact, as observed by the CIT(A), the assessee only had an access to services and did not have any access to any equipment deployed by RJIPL for providing the bandwith services. Apart there from, the assessee also did not have any access to any process which helped in providing of such bandwith services by RJIPL. As a matter of fact, all infrastructure and process required for provision of bandwith services was always used and under the control of RJIPL, and the same was never given either to the assessee or to any other person availing the said services

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DATE: April 25, 2019 (Date of pronouncement)
DATE: June 1, 2019 (Date of publication)
AY: -
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CITATION:
S. 276B Prosecution for delay in payment of TDS: The default is complete if the TDS is not deposited in time. Late deposit does not absolve the accused. The accused has no right to retain the TDS amount and use it for any other purpose. Pleas of financial problem, incompetent staff, accountant's negligence, unawareness about law etc are not acceptable as a defense (Madhumilan Syntex AIR 2007 SC (148) followed)

Considering all the discussion and record, it clear that the accused deducted TDS amount for the relevant financial year 20092010 but failed to deposit the TDS amount with Government account within stipulated time. The accused is responsible person to pay the amount within time. The factum of non deposit of tax amount within time has been proved and admitted by the accused during statement recorded u/s. 313 of Cr.P.C. Thus, no further evidence is required to prove the case of the complainant. Admission is the best evidence to prove the allegations. Thus, in view of aforesaid case laws and admission by the accused, the case of complainant stands proved. All the facts clearly indicates that accused deducted the TDS for the relevant period and did not deposit the same with Government account within stipulated period and withheld the same for her own use. Accused can not be allowed to use the tax amount, so deducted for any other purpose. The TDS deducted on behalf of the Government and should be deposited in Government account. Deductor is not supposed to finance their business through Government money. Therefore, considering the evidence available on record, I come to conclusion that the accused is the person to pay tax within time and accused failed to deposit TDS within time. Therefore, the complainant has proved the case against the accused beyond reasonable doubt and proved the guilt of the accused u/s. 276B of I.T. Act.

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DATE: May 16, 2019 (Date of pronouncement)
DATE: June 1, 2019 (Date of publication)
AY: 2012-13
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CITATION:
S. 145(2) "Project Completion Method" vs. "Percentage Completion Method": Dept's argument that assessee should have declared profit on percentage completion method because according to AS-7, revised in 2002 with effect from 01.04.2003, the 'Completed Contract method' has been scrapped & ICAI guidelines prefer the percentage completion method is not acceptable (Realest Builders 307 ITR 202 (SC) distinguished, All judgements referred)

As regards to the adoption of project completion method of accounting by the assessee, it is seen that the assessee’s business came into existence from 11.03.2003 and since then it has been consistently following project completion method of accounting. The Ld. AR has contended that the assessee has never deviated from such method of accounting since the inception of the business and that the revenue had also accepted project completion method and profit shown by the assessee during the assessment proceedings for AY 2014-15 in assessee’s own case which also finds mention in para 6.2.1 of the order passed by Ld. CIT(A). It is well settled that the project completion method is one of the recognized method of accounting and as the assessee has consistently been followed such recognized method of accounting thus in the absence of any prohibition or restriction under the act for doing so, it can’t be held that the decision of the CIT(A) was erroneous or illegal in any manner. The judgement in the case of “CIT vs. Realest Builders & Services Ltd.”, (Supra) relied Id. DR on method of accounting is rather in favor of the assessee and against the revenue

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DATE: May 9, 2019 (Date of pronouncement)
DATE: May 18, 2019 (Date of publication)
AY: -
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CITATION:
Benami Transactions: While considering whether a particular transaction is benami, the intention of the person who contributed the purchase money is determinative. The intention has to be decided on the basis of surrounding circumstances; relationship of parties; motives governing their action in bringing about the transaction and subsequent conduct. The payment of part sale consideration & stamp duty cannot be the sole criteria to hold the sale/transaction as benami

It is required to be noted that the benami transaction came to be amended in the year 2016. As per Section 3 of the Benami Transaction (Prohibition) Act 1988, there was a presumption that the transaction made in the name of the wife and children is for their benefit. By Benami Amendment Act,2016, Section 3 (2) of the Benami Transaction Act, 1988 the statutory presumption, which was rebuttable, has been omitted.It is the case on behalf of the respondents that therefore in view of omission of Section 3(2) of the Benami Transaction Act, the plea of statutory transaction that the purchase made in the name of wife or children is for their benefit would not be available in the present case. Aforesaid cannot be accepted. As held by this Court in the case of Binapani Paul (Supra) the Benami Transaction (Prohibition) Act would not be applicable retrospectively

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DATE: May 17, 2019 (Date of pronouncement)
DATE: May 18, 2019 (Date of publication)
AY: -
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CITATION:
ITAT Members' Appointment: The action of the Selection Committee of short-listing only 24 candidates for interview out of 649 applications is not violative of Article 14. The criteria of short-listing Advocates in practice for at least 20 years and with income of not less than Rs. 1.40 lakh for post of Judicial Member is rational and reasonable and not arbitrary

Considering the above provisions, guidelines, status of applications and on perusal of list of candidates in decreasing order of their experience, the interim Search-cum-Selection Committee decided to call 24 most experienced applicants who were practicing Advocates for interview. The above-mentioned principle has been upheld by the Supreme Court in catena of judgments wherein it has been held that if the number of applications are enormous in number with reference to the number of posts available to be filled up then the Selection Board has no option but to short-list such applications on some rational and reasonable basis

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DATE: April 25, 2019 (Date of pronouncement)
DATE: May 11, 2019 (Date of publication)
AY: 2008-09, 2011-12, 2012-13
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CITATION:
S. 14A/ Rule 8D: Though, after Maxopp Investment 402 ITR 640 (SC), even "strategic investments" have to be considered for disallowance, the assessee is entitled to contend that the investments are "legacy" or "one-time" and that there is in fact no expenditure incurred to earn the tax-free income

It is apparent from a reading of the facts in the appeal that the CIT(A) formed an opinion based upon diverse reasoning, having regard to the facts of each case, regarding the nature of expenditure and especially whether it was a one-time investment opportunity availed of by the assessee. This is relevant in the context of assessee’s assertion that in fact no expenditure was incurred while investing in the mutual funds that yielded substantial income. As to whether in fact no expenditure was incurred or attributable at all, in these circumstances, it becomes a factual controversy requiring further hearing and scrutiny.

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DATE: April 25, 2019 (Date of pronouncement)
DATE: May 11, 2019 (Date of publication)
AY: 2014-15
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CITATION:
S. 10(38) Bogus Capital Gains From Penny Stocks: U/s 101 of Evidence Act, 1972, the onus is on the assessee to prove that the LTCG is genuine. The assessee cannot, on failure to establish a prima facie case, take advantage of the weakness in the AO's case. The jump in the share price of a company of unknown credentials cannot be an accident or windfall but is possible because of manipulations in a pre-planned manner by interested broker and entry operators. The LTCG transactions are a sham

Documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case as it is revealed that purchase and sale of shares are arranged transactions to create bogus profit in the garb of tax exempt long terra capital gain by well organised network of entry providers with the sole motive to sell such entries to enable the beneficiary to account for the undisclosed income for a consideration or commission. I further find that the share transactions leading to long term capital gains by the assessee are sham transaction entered into for the purpose of evading tax.

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DATE: May 1, 2019 (Date of pronouncement)
DATE: May 11, 2019 (Date of publication)
AY: 2008-09 to 2013-14
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CITATION:
Natural Justice: The assessee cannot be kept in the dark. Adverse statements or materials cannot be kept away from his eyes. If the AO intends to use it to draw adverse inference/finding, the assessee should be provided the adverse material/statements in order to rebut/cross examine the provider/maker of the adverse material. Failure to do so is a serious flaw which renders the assessment a nullity (All imp judgements referred)

It has to be kept in mind that the AO is empowered to collect materials behind the back of the assessee, however if he intends to use it adversely against the assessee, then it is incumbent upon him to furnish a copy of the materials/statements to the assessee and the assessee should be provided an opportunity to rebut/cross examine the provider/maker of the adverse material. The assessee cannot be kept in the dark and the adverse statements or materials cannot be kept away from his eyes, and if the AO was intending to use it against the assessee to draw adverse inference/finding, then the assessee should be provided the adverse material/statements in order to rebut/cross examine the provider/maker of the adverse material, which is a natural right of the assessee and we find that it has not been done in this case, resulting in violation of natural justice. We are therefore of the considered view that the general statements recorded from the alleged entry operators by themselves with the legal infirmities pointed out, supra, did not constitute incriminating material for the purposes of Section 153A of the Act

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