The CBDT has accepted that incorrect and wrong demands have been uploaded on the CPC arrears portal. In his letter dated 21.08.2012, the CIT, CPC, has expressed his concern and anguish on account of uploading of incorrect and wrong data in the CPU and the problem faced by them and by the assesses. The CBDT has issued Circular No. 4 of 2012 in which the burden is put on the assessee to approach the AOs to get their records updated and corrected by filing s. 154 applications. While this may be the easiest option available, it should not be a ground for the AO not to suo motu correct his records and upload correct data. Each assessee has a right and can demand that correct and true data relating to the past demands should be uploaded. Asking the assessee to file s. 154 applications entails substantial expenses and defeats the main purpose behind computerisation. Also, the AO’s do not adhere to the time limit prescribed for disposal of the s. 154 applications. To ensure transparency (and accountability), a register must be maintained with details and particulars of each application made u/s 154, the date on which it was made, date of disposal and its fate. The s. 154 application has to be disposed of by a speaking order and communicated to the assessee. There must be full compliance of the said requirements

The Circular is purported to be issued in terms of the judgement in Krishna Sales (73) ELT 519 (SC). Though in Krishna Sales it was held that mere filing of an appeal does not operate as stay or suspension of the order appealed against, the Board has overlooked the fact that the assessee is not seeking stay only on account of filing of an appeal, but for the reason that the assessee has sought dispensing with the pre-deposit of duty and penalty and has a right to demand decision on such application, a right which is created by the Statute. Therefore, the very basis of the Circular is untenable, misconceived, wholly illegal and arbitrary. Therefore, the condition of recovery, if no stay is granted within 30 days, is illegal, arbitrary, unjustified and consequently set aside (Larsen & Tuobro (Bom) referred)

The assessee took a business decision not to honour its commitment of fulfilling the export entitlement in view of loss being suffered by it. The genuineness of the claim of expenditure being for business purpose is not disputed. The assessee has not contravened any provision of law and the forfeiture of the bank guarantee is compensatory in nature and does not attract the Explanation to s. 37(1)

No s. 271(1)(c) penalty if income not offered due to “inadvertent mistake“

A family partition which results in an adjustment of shares and of the respective rights in the family properties is not a “transfer” in the eyes of law. When there is no transfer of asset, there is no capital gain and consequently there is no liability to pay tax on capital gains. In a family partition, a situation arises where an item of property is not capable of physical partition or is such that, if divided, it will lose its intrinsic worth. In such a case, with a view to ensure an equitable partition, the item is allotted to one party and he is asked to pay compensation in money value to the other party. This amount is called “owelty”. As the amount of compensation is only to equalize the inequalities in the partition it is nothing but a share in the immovable property itself (though paid in cash) and cannot be treated as income liable to capital gain. If such amount is to be treated as income liable to tax, inequalities would set in as the share of the recipient will diminish to the extent of tax. On facts, the payment of Rs.24 crores to Group A is to equalize the inequalities in partition of assets. The amount so paid is immovable property and is not income liable to tax (T.S.Swaminatha Odayar vs. Official Receiver AIR 1957 SC 577, CIT vs. A. L. Ramanathan 245 ITR 494 (Mad), CIT vs. Kay Arr Enterprises 299 ITR 348, CIT vs. R. Nagaraja Rao 207 Taxmann 74 (Kar) & Ziauddin Ahmed vs. CIT 102 ITR 253 (Gau), Parvathi Amma Vs. Makki Amma AIR 1962 Kerala 85 reviewed)

On facts, the compensation was for loss of a source of income, namely referred work from Deloitte because it is somewhat difficult to conceive of a professional firm of chartered accountants entering into such arrangements with international firms of CAs, as the assessee in the present case had done, with the same frequency and regularity with which companies carrying on business take agencies, simultaneously running the risk of such agencies being terminated with the strong possibility of fresh agencies being taken. In a firm of chartered accountants there could be separate sources of professional income such as tax work, audit work, certification work, opinion work as also referred work. Under the arrangement with DHS there was a regular inflow of referred work from DHS through the Calcutta firm in respect of clients based in Delhi and nearby areas. There is no evidence that the assessee had entered into similar arrangements with other international firms of chartered accountants. The arrangement with DHS was in vogue for a fairly long period of time -13 years- and had acquired a kind of permanency as a source of income. When that source was unexpectedly terminated, it amounted to the impairment of the profit-making structure or apparatus of the assessee. It is for that loss of the source of income that the compensation was calculated and paid to the assessee. The compensation was thus a substitute for the source and the Tribunal was wrong in treating the receipt as being revenue in nature (Best & Co 60 ITR 11 (SC) distinguished)

As held in D. Ananda Bassappa (SLP dismissed) & K G Rukminiamma, the Revenue’s contention that the phrase “a” residential house would mean “one” residential house is not correct. The expression “a” residential house should be understood in a sense that building should be of residential in nature and “a” should not be understood to indicate a singular number. Also, s. 54/54F uses the expression “a residential house” and not “a residential unit”. S. 54/54F requires the assessee to acquire a “residential house” and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the Section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems to us that the income tax authorities cannot insist upon that requirement. A person may construct a house according to his plans, requirements and compulsions. A person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post-retirement. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. The physical structuring of the new residential house, whether it is lateral or vertical, cannot come in the way of considering the building as a residential house. The fact that the residential house consists of several independent units cannot be permitted to act as an impediment to the allowance of the deduction u/s 54/54F. It is neither expressly nor by necessary implication prohibited