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DATE: January 17, 2019 (Date of pronouncement)
DATE: January 19, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 147 Reopening of Bogus Sales/ Purchases: If the AO disallowed 2.5% of alleged bogus purchases during the regular assessment, he cannot reopen on the ground that as per N. K. Proteins Ltd 2017-TIOL-23-SC-IT the entire amount should have been disallowed as this amounts to change of opinion

In other words, during the previous reassessment proceedings, the Assessing Officer examined the alleged bogus sales of the assessee, taxed 2.25% thereof as assessee’s additional income and passed the order of assessment accordingly. The Assessing Officer now believes that taxing 2.25% of the sales, was an error and instead the entire amount should have been added to the assessee’s income. This would be a mere change of opinion

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DATE: (Date of pronouncement)
DATE: January 19, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 147 Reopening of S. 143(1) Intimations: The mere fact that the return is processed u/s 143(1) does not give the AO a carte blanche to issue a reopening notice. The basic condition precedent of 'reason to believe' applies even to s. 143(1) intimations. If the assessee claims the facts recorded in the reasons are not correct, the order on objection must deal with them. Otherwise an adverse inference can be drawn against the Revenue

Even in cases where the return of income has been accepted by processing under Section 143(1) of the Act, reopening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed under Section 143(1) of the Act, does not give the Assessing Officer a carte blanc to issue a reopening notice

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DATE: January 3, 2019 (Date of pronouncement)
DATE: January 19, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 254(2): The law in CIT vs. Ramesh Electrical Co 203 ITR 497 (Bom) that failure to deal with an argument does not constitute a 'mistake apparent from the record' does not apply to a case where a fundamental submission is omitted to be considered by the ITAT. The omission is apparent from the record and should be rectified by the ITAT

The Tribunal ignored the fact that the above observation of this Court in Ramesh Electrical (supra) was on the basis that for a rectification application to be maintainable, the mistake should be apparent from the record. In this case, the mistake / error in not dealing with the fundamental submission in appeal is apparent from the record, as the submission that the distribution fee was not royalty was recorded and yet not dealt with in the order

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DATE: January 7, 2019 (Date of pronouncement)
DATE: January 17, 2019 (Date of publication)
AY: -
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CITATION:
S. 40(a)(ia): The second proviso to s. 40(a)(ia) is beneficial to the assessee and is declaratory and curative in nature. Accordingly, it must be given retrospective effect

Various Courts, however, have seen this proviso as beneficial to the assessee and curative in nature. The leading judgment on this point was of the Division Bench of Delhi Court in the case of CIT Vs. Ansal Land Mark Township P Ltd [2015] 377 ITR 635 (Delhi). The Court held that Section 40(a)(ia) is not a penalty and insertion of second proviso is declaratory and curative in nature and would have retrospective effect form 1.4.2005 i.e the date from the main proviso 40(a)(ia) itself was inserted

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DATE: December 21, 2018 (Date of pronouncement)
DATE: January 17, 2019 (Date of publication)
AY: -
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CITATION:
Law on what constitutes a "fixed place permanent establishment" under Articles 5(1) to 5(3) of India-USA DTAA explained after referring to all judgements and pronouncements from the OCED Commentary and eminent authors

GE’s overseas enterprises have a place of business in India, per Article 5(1) of the DTAA. The term “place of business” has been understood to mean any premises, facilities or installations used for carrying on the business of the enterprise – does not have to be exclusively used for that purpose [OECD Model Tax Convention on Income and on Capital, Commentary on Article 5 Concerning the Definition of Permanent Establishment, para. 4 (“OECD MTC”)], with even a certain amount of space at its disposal is sufficient to cause fixed place of business.1 Moreover, having space at disposal does not require a legal right to use that place – mere continuous usage is sufficient if it indicates being at disposal. (Ref Para 4.1 of OECD MTC)

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DATE: August 10, 2018 (Date of pronouncement)
DATE: January 17, 2019 (Date of publication)
AY: 2009-10, 2010-11
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CITATION:
S. 28(iv) /68: Bogus share premium: The fact that the premium is abnormally high as per test of human probabilities is not sufficient. The AO has to lift the corporate veil & determine whether any benefit is passed on to the shareholders/directors. Directions issued to AO to establish whether assessee company was used as a vehicle to pass on the benefit to shareholders/directors

We also cannot presume or apply test of human probabilities, we are dealing with the business transaction, it has to be based on cogent material. Considering the whole situation, in our considered view, the AO/CIT(A) have restricted themselves by stopping the investigation based on circumstantial evidence and applying test of human probabilities. In order to lift the corporate veil for the purpose of determining whether any benefit is passed on to the shareholders/directors, they have to bring on record proper evidence/cogent material

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DATE: October 15, 2018 (Date of pronouncement)
DATE: January 5, 2019 (Date of publication)
AY: -
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CITATION:
TDS on salaries: Default by employers in not issuing Form 16 TDS certificates to employees prima facie makes employers liable to prosecution u/s 405 of the Indian Penal Code (IPC). Dept should provide information of such defaulters so that those seeking employment etc would know in advance as to how the employers are complying with law

During the course of arguments, we have invited Mr.Suresh Kumar’s attention to Section 405 of the Indian Penal Code, 1860 and we find that prima facie, the reading of this Section together with its explanation furnishes enough ground to bring the persons like respondent Nos.2 to 5 to book by applying provisions of Section 405 of the Indian Penal Code to them. We do not see any record till date of the Department of Revenue having applied such a provision in the prosecution launched against such defaulters

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DATE: November 26, 2018 (Date of pronouncement)
DATE: January 5, 2019 (Date of publication)
AY: 2008-09
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CITATION:
Capital Gains vs. Business Profits: Merely holding shares for a short period will not convert capital gain into business income. This would be contrary to be legislative mandate which itself provides that investment held for less than 12 months is to be termed as short term capital gain. If the assessee has two portfolios, one for "Investment" and other for "Trading" and if the investments are out of own funds and not borrowed funds, the gains have to be assessed as STCG

Thus two port-folios one for “Investment” and other for “Trading”. Besides for the earlier years the Revenue accepted the claim of short term capital gain. Thus the income has to be taxed as short term capital gain. We are of the view that respondent holding the shares for a short period, will not convert the capital gain into business income. This would be contrary to be legislative mandate which itself provides that when the investment is held for less than 12 months, it is to be termed as short term capital gain

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