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DATE: April 6, 2021 (Date of pronouncement)
DATE: April 24, 2021 (Date of publication)
AY: AY 2019-20
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CITATION:
S. 245 Adjustment of Refund: The Dept has not complied with the requirements of s. 245 of the Act. It is difficult to appreciate the stand of the Dept that the order passed by the high court would not cover/operate over the matters and orders passed by the ITAT, Union of India being not a party to the matter. Such a justification from and the approach of, the authorities is difficult to be approved of which is not in fitness of stature, especially of the state department, which is supposed to act like a model litigant (All imp judgements on s. 245 referred)

Although the respondents purport to contend that proper procedure had been followed, record does not bear that there had been any communication made to the petitioner as to its submissions being not acceptable before or at the time of making the adjustment. Decisions in the cases of “A. N. Shaikh”, “Hindustan Unilever Ltd.,” and “Milestone Real Estate Fund” (supra) relied on, on behalf of the petitioner have not been met with by the respondents nor it is the case of the respondents that any other course could be adopted for adjustment of refund. There is stark absence of material showing compliance of requirements viz: application of mind to contentions on behalf of the petitioner, reasoned order and its communication to the assessee. The facts and circumstances lend lot of substance to submissions advanced on behalf of the petitioner that there is absence of compliance of requirements under section 245 of the Act, coupled with observations of high court in the decisions relied upon on behalf of the petitioners

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DATE: April 9, 2021 (Date of pronouncement)
DATE: April 24, 2021 (Date of publication)
AY: 2012-13
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CITATION:
Article 226/ s. 147: (i) A Writ Petition can be filed in the Bombay High Court against an order passed in Delhi if the assessee is based in Mumbai. The litigant has the right to go to ‘a Court’ where part of cause of action arises. (ii) A s. 148 notice & s. 147 reassessment order passed against an amalgamated (non-existing) company is without jurisdiction. The defect cannot be treated as procedural defect. Mere participation of the assessee in the assessment proceedings is of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking section 292B (All imp judgements referred)

The consequence of approved scheme of amalgamation was that amalgamating company had ceased to exist and on its ceasing to exist, it cannot be regarded as a person against whom assessment proceeding can be initiated. In said case before notice under Section 143(2) of the Act was issued on 26.9.2013, the scheme of amalgamation had been approved by the high court with effect from 1.4.2012. It has been observed that assessment order passed for the assessment year 2012-13 in the name of non-existing entity is a substantive illegality and would not be procedural violation of Section 292 (b) of the Act. The Supreme Court in its aforesaid decision, has quoted an extract from its decision in Saraswati Industrial Syndicate Ltd. Vs. CIT8. The Supreme Court has also referred to decision of Delhi high court in the case of CIT Vs. Spice Enfotainment Ltd.9and observed that in its decision Delhi high court had held that assessment order passed against non-existing company would be void. Such defect cannot be treated as procedural defect and mere participation of appellant would be of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking provisions under section 292B

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DATE: April 13, 2021 (Date of pronouncement)
DATE: April 24, 2021 (Date of publication)
AY: 2013-14
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CITATION:
S. 56(2) (viib): The object of s. 56(2)(viib) is to tax excessive share premium received unjustifiably by private companies on issue of shares without carrying underlying value. However, shares issued to shareholders of an amalgamating company in terms of a scheme of amalgamation does not fall within the sweep of the deeming provisions of s. 56(2) (viib). The so-called excess value of assets vested on amalgamation cannot be notionally termed as premium over the face value for the purposes of the deeming provision (AS-14 issued by the ICAI & CBDT Circular No 3/2012 dated 12-6-2012 referred)

To summarise, in our view, the issue of shares at ‘face value’ by the amalgamated company (assessee) to the shareholders of amalgamating company in pursuance of scheme of amalgamation legally recognized in the Court of Law neither falls with scope & ambit of clause (viib) to S. 56(2), when tested on the touchstone of objects and purpose of such insertion i.e. to deem unjustified premiums charged on issue of shares as taxable income; nor does it fall in its sweep when such deeming clause is subjected to interpretative process having regard to the scheme of the Act

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DATE: January 15, 2021 (Date of pronouncement)
DATE: April 17, 2021 (Date of publication)
AY: 2011-12
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CITATION:
S. 50C: The 3rd Proviso to s. 50C, inserted by the Finance Act 2018, provides that s. 50C will not apply if the difference between the stamp duty valuation and the actual consideration does not exceed 5%. This tolerance band was increased to 10% by the Finance Act 2020. Though the amendments are stated to be prospective, they are curative in nature and must be held to relate back to the date when Section 50C was inserted, i.e. 1st April 2003. Accordingly, if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face value and the anti-avoidance provisions under section 50C will not be invoked

As noted by the Central Board of Direct Taxes circular # 8 of 2018, explaining the reason for the insertion of the third proviso to Section 50C(1), has observed that “It has been pointed out that the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location”. Once the CBDT itself accepts that these variations could be on account of a variety of factors, essentially bonafide factors, and, for this reason, Section 50C(1) should not come into play, it was an “unintended consequence” of Section 50(1) that even in such bonafide situations, this provision, which is inherently in the nature of an anti-avoidance provision, is invoked. Once this situation is sought to be addressed, as is the settled legal position- as we will see a little later in our analysis, this situation needs to be addressed in entirety for the entire period in which such legal provisions had effect, and not for a specific time period only. There is no good reason for holding the curative amendment to be only as prospective in effect.

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DATE: April 15, 2021 (Date of pronouncement)
DATE: April 17, 2021 (Date of publication)
AY: -
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CITATION:
Limitation Act: The principle of s. 9 of the Limitation Act, namely, that when time begins to run, it cannot be halted, except by a process known to law, has to be strictly adhered to. S. 18 of the Limitation Act, which extends the period of limitation depending upon an acknowledgement of debt made in writing and signed by the corporate debtor, is also applicable to the Insolvency and Bankruptcy Code since s. 238A uses the expression “as far as may be” governing the applicability of the Limitation Act. An entry made in the books of accounts, including the balance sheet, can amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act. The notes annexed to or forming part of the balance sheet, or the auditor’s report, must be read along with the balance sheet. (V. Padmakumar v. Stressed Assets Stabilisation Fund (NCLAT)(FB) reversed. All imp judgements referred).

Under S. 18 an acknowledgement of liability signed by the party against whom the right is claimed gives rise to a fresh period of limitation. Under Explanation (b) to the Section the word ‘signed’ means signed either personally or by an agent duly authorised. A company being a corporate body acts through its representatives, the Managing Director and the Board of Directors. Under S. 210 of the Companies Act it is the statutory duty of the Board of Directors to lay before the Company at every annual general body meeting a balance sheet and a profit and loss account for the preceding financial year. S. 211 directs that the form and contents of the balance sheet should be as set out in Part I of Schedule VI. The said form stipulates for the details of the loans and advances and also of sundry creditors. The balance sheet should be approved by the Board of Directors, and thereafter authenticated by the Manager or the Secretary if any and not less than two directors one of whom should be the Managing Director. (See S. 215). The Act also provides for supply of copies of the balance sheet to the members before the company in general meeting. Going by the above provisions, a balance sheet is the statement of assets and liabilities of the company as at the end of the financial year, approved by the Board of Directors and authenticated in the manner provided by law. The persons who authenticate the document do so in their capacity as agents of the company. The inclusion of a debt in a balance sheet duly prepared and authenticated would amount to admission of a liability and therefore satisfies the requirements of law for a valid acknowledgement under S. 18 of the Limitation Act, even though the directors by authenticating the balance sheet merely discharge a statutory duty and may not have intended to make an acknowledgement.

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DATE: April 16, 2021 (Date of pronouncement)
DATE: April 17, 2021 (Date of publication)
AY: -
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CITATION:
Courts are inundated with complaints filed under Section 138 of the Negotiable Instruments Act, 1881. The cases are not being decided within a reasonable period and remain pending for a number of years. This gargantuan pendency of complaints filed under s. 138 of the Act has had an adverse effect in disposal of other criminal cases. Concerned with the large number of cases pending at various levels, a Larger Bench of the Supreme Court has examined the reasons for the delay in disposal of the cases. The Bench has issued important directions which will expedite the hearing and disposal of the cases

Chapter XVII inserted in the Negotiable Instruments Act, containing Sections 138 to 142, came into force on 01.04.1989. Dishonour of cheques for insufficiency of funds was made punishable with imprisonment for a term of one year or with fine which may extend to twice the amount of the cheque as per Section 138. Section 139 dealt with the presumption in favour of the holder that the cheque received was for the discharge, in whole or in part, of any debt or other liability. The defence which may not be allowed in a prosecution under Section 138 of the Act is governed by Section 140. Section 141 pertains to offences by companies. Section 142 lays down conditions under which cognizance of offences may be taken under Section 138. Over the years, courts were inundated with complaints filed under Section 138 of the Act which could not be decided within a reasonable period and remained pending for a number of years.

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DATE: April 9, 2021 (Date of pronouncement)
DATE: April 14, 2021 (Date of publication)
AY: -
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CITATION:
The DTVSV Act, 2020 is an Act to provide for resolution of disputed tax and matters connected therewith or incidental thereto. The emphasis is on disputed tax and not on disputed income. From a plain reading of the provisions of the DTVSV Act, 2020 and the Rules set out above, it emerges that the Designated Authority would have to issue Form 3 as referred to in section 5(1) specifying the amount payable in accordance with section 3 of the DTVSV Act. In the case of the declarant who is an eligible appellant not falling under section 4(6) nor within the exceptions in section 9 of the DTVSV Act, 2020, which fact appears to be undisputed

Before Hon’ble High Court, the Petitioner challenged the arbitrary and unreasonable action of the Designated Authority (Respondent No.2) in rejecting the declarationfiled under the DTVSV Act. It was argued before the Hon’ble High Court that thePetitioner’s case doesn’t fall under any of the disqualifications mentioned in section 9 of the DTVSV Act, 2020 and therefore, the Designated Authority has no power to reject the application without assigning any reason for the same. It was submitted before the Hon’ble Court that the Petitioner has satisfied all the conditions to make the declaration under the DTVSV Act, 2020 and therefore, he is eligible to seek all the benefits under the said Act. On the other hand, the department argued that the declaration of the Petitioner is not valid as there cannot be any disputed tax in the absence of any disputed income. Thus, the declaration of the Petitioner has been rightly rejected

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DATE: April 6, 2021 (Date of pronouncement)
DATE: April 7, 2021 (Date of publication)
AY: -
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CITATION:
S. 254(2A) Stay by ITAT: Since the object of the 3rd proviso to s. 254(2A) is the automatic vacation of a stay that has been granted on the completion of 365 days, whether or not the assessee is responsible for the delay caused in hearing the appeal, such object being itself discriminatory, is liable to be struck down as violating Article 14 of the Constitution of India. Also, the said proviso would result in the automatic vacation of a stay upon the expiry of 365 days even if the Appellate Tribunal could not take up the appeal in time for no fault of the assessee. Further, vacation of stay in favour of the revenue would ensue even if the revenue is itself responsible for the delay in hearing the appeal. In this sense, the said proviso is also manifestly arbitrary being a provision which is capricious, irrational and disproportionate so far as the assessee is concerned. Consequently, the third proviso to s. 254(2A) will now be read without the word “even” and the words “is not” after the words “delay in disposing of the appeal”. Any order of stay shall stand vacated after the expiry of the period or periods mentioned in the Section only if the delay in disposing of the appeal is attributable to the assessee.

Judged by both these parameters, there can be no doubt that the third proviso to Section 254(2A) of the Income Tax Act, introduced by the Finance Act, 2008, would be both arbitrary and discriminatory and, therefore, liable to be struck down as offending Article 14 of the Constitution of India. First and foremost, as has correctly been held in the impugned judgment, unequals are treated equally in that no differentiation is made by the third proviso between the assessees who 23 https://itatonline.org are responsible for delaying the proceedings and assessees who are not so responsible. This is a little peculiar in that the legislature itself has made the aforesaid differentiation in the second proviso to Section 254(2A) of the Income Tax Act, making it clear that a stay order may be extended upto a period of 365 days upon satisfaction that the delay in disposing of the appeal is not attributable to the assessee. We have already seen as to how, as correctly held by Narang Overseas (supra), the second proviso was introduced by the Finance Act, 2007 to mitigate the rigour of the first proviso to Section 254(2A) of the Income Tax Act in its previous avatar. Ordinarily, the Appellate Tribunal, where possible, is to hear and decide appeals within a period of four years from the end of the financial year in which such appeal is filed. It is only when a stay of the impugned order before the Appellate Tribunal is granted, that the appeal is required to be disposed of within 365 days. So far as the disposal of an appeal by the Appellate Tribunal is concerned, this is a directory provision. However, so far as vacation of stay on expiry of the said period is concerned, this condition becomes mandatory so far as the assessee is concerned. The object sought to be achieved by the third proviso to Section 254(2A) of the Income Tax Act is without doubt the speedy disposal of appeals before the Appellate Tribunal in cases in which a stay has been granted in favour of the assessee.

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DATE: March 25, 2021 (Date of pronouncement)
DATE: March 27, 2021 (Date of publication)
AY: 2018-19
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CITATION:
S. 11/ Form No.10B: Under Circular No.2 / 2020 dated 03.01.2020, the CBDT has delegated the power to the CIT to admit belated applications in filing Form No.10B for AY 2018-19 and onwards for a period of only upto 365 days. There is no error or infirmity in this stand. Fixing a period of one year’s delay i.e., 365 days of delay for condonation of delay in filing Form No.10B for AY 2018-19 and onwards cannot be said to be arbitrary or irrational. However, there is also nothing in s. 119(2)(b) preventing or precluding the CBDT from passing a special order in any given case from condoning the delay in filing Form No.10B beyond 365 days despite passing a general order. The Petitioner should approach the CBDT which will deal with the claim on merit and in accordance with law

We do not find any error or infirmity in the view taken by the CBDT vide Circular No.2 / 2020 or by the Commissioner while passing the impugned order dated 19.02.2020. Fixing a period of one year’s delay i.e., 365 days of delay for condonation of delay in filing Form No.10B for the assessment year 2018-19 and onwards cannot be said to be arbitrary or irrational. Therefore the general order passed by the CBDT in this regard under section 119(2)(b) cannot be faulted. However, there is also nothing in section 119(2)(b) preventing or precluding CBDT from passing a special order in any given case from condoning the delay in filing Form No.10B beyond 365 days despite passing a general order

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DATE: March 25, 2021 (Date of pronouncement)
DATE: March 27, 2021 (Date of publication)
AY: 2015-16
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CITATION:
Vivad se Vishwas Act: The CBDT's answer to question No.73 that the ineligibility u/s 9(a)(ii) relates to an assessment year and if for that assessment year a prosecution has been instituted, then the taxpayer would not be eligible to file declaration for the said assessment year even on issues not relating to prosecution would not only be illogical and irrational but would be in complete deviation from section 9(a)(ii). On a literal or purposive interpretation, the only exclusion visualized under the said provision is pendency of a prosecution in respect of tax arrear relatable to an assessment year as on the date of filing of declaration and not pendency of a prosecution in respect of an assessment year on any issue. To hold that an assessee would not be eligible to file a declaration because there is a pending prosecution for the assessment year in question on an issue unrelated to tax arrear would defeat the very purport and object of the Vivad se Vishwas Act

The prosecution against the petitioner has been initiated under section 276-C(2) of the Act because of the delayed payment of the balance amount of the self-assessment tax. Such delayed payment cannot be construed to be a tax arrear within the meaning of section 2(1)(o) of the Act. Therefore such a prosecution cannot be said to be in respect of tax arrear. Because such a prosecution is pending which is relatable to the assessment year 2015-16, it would be in complete defiance of logic to debar the petitioner from filing a declaration for settlement of tax arrear for the said assessment year which is pending in appeal before the Tribunal.

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