This view is now not tenable in view of the judgements of the Supreme Court in Honda Siel Power Products 295 ITR 466 and Saurashtra Kutch Stock Exchange 262 ITR 146 where it was held that the power of rectification has been conferred on the tribunal to see that no prejudice is caused to either of the parties appearing before it by its decision based on a mistake apparent from the record. It was held that atonement to the wronged party by the court or the tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review. The Supreme Court clearly stated that it was the fundamental principle is that no party appearing before the tribunal should suffer on account of any mistake committed by the Tribunal and no prejudice should be caused to either of the parties before the Tribunal which is attributable to the Tribunal’s mistake, omission or commission and if the same error is a manifest error, then the Tribunal would be justified to recall

Both the Tribunal and the AO have held that what was done by the assessee is clearly an attempt to evade tax in order to get over s. 55(2). It is a well settled principle of law that what is permissible is avoidance but not evasion. When an attempt is made by a company to evade tax it is the bounden duty of the authorities to lift the corporate veil and find out the real intention behind the same. It is the duty of the Court in every case, where ingenuity is expended to avoid taxing and welfare legislation, to get behind the smoke screen and discover the true state of affairs. The Court is not to be satisfied with form and leave well alone the substance of a transaction

When a quasi judicial authority like the DRP deals with a lis, it is obligatory on its part to ascribe cogent and germane reasons as the same is the heart and soul of the matter. And further, the same also facilitates appreciation when the order is called in question before the superior forum

The DRP’s order suffers from the vice of being contrary to the record as well as non-application of mind and causes immense prejudice to the assessee. The assessee had never sought withdrawal of the objections filed by it but had requested the DRP for consent to approach the AO to issue the final order so as to file an appeal before the CIT (A). If the DRP was of the view that it did not have the jurisdiction to give such consent or that the objections could not be withdrawn, it could have rejected the application but ought to have dealt with the objections on merits. The result of the DRP’s stand was that all doors for the assessee were closed because its objections had not been considered by the DRP, an appeal against the assessment order could not be filed before the CIT (A) and even an appeal against the DRP’s order would be an exercise in futility. This is not sustainable. Accordingly the objections are restored to the DRP with direction to consider on merits within 3 months

No coercive recovery if first appeal ready for hearing

Considering all these aspects, it is foregone conclusion that the avoidance of tax is taking place only if the present scheme is sanctioned by the Court, otherwise not. The transferee is nothing but a paper company being only intermediate for transferring Passive Infrastructure assets from transferor companies to Indus for the purpose of tax evasion. This is clear from the fact that it has only paid up capital of Rs. 5 lacs especially when it is to hold assets worth Rs. 15,000 cr post sanction of the scheme. (Wood Polymer Ltd 47 Comp Cases 597 (Guj) and McDowell & Co 154 ITR 148 (SC) followed)

Before invoking s. 158 BD, the AO must record his satisfaction in writing on the basis of material found in the search that the undisclosed income belongs to a person other than the person searched. This is a safeguard to prevent abuse of power. In the absence of written satisfaction the AO has no jurisdiction to assess the other person u/s 158BD. On facts, as the “satisfaction” note was not produced, the s. 158BD proceedings were liable to be quashed

There is no presumption that every acquisition by a dealer in a particular commodity is acquisition for the purpose of his business. A dealer may acquire a commodity as a capital asset. In each case the question is one of intention to be gathered from the evidence of conduct and dealings by the acquirer with the commodity (Madan Gopal Radhey Lal 73 ITR 652 (SC) & Vijaya Bank 187 ITR 541 (SC) followed)

S. 2(22)(ii) excludes loans and advances where (a) the loan or advance was made by the lending-company in the ordinary course of its business and (ii) lending of money is a “substantial part” of the business of the lending-company. The first condition was satisfied as the business of the assessee was complimentary to the business of AMPL. As regards the second condition, the expression “substantial part” does not connote an idea of being the “major part” or the part that constitutes majority of the whole. Any business which the company does not regard as small, trivial, or inconsequential as compared to the whole of the business is substantial business. Various factors and circumstances such as turnover, profit, employees, capital employed etc are required to be looked into while considering whether a part of the business of a company is a “substantial part of its business”

Applying the test of literal construction, s. 80-IA (9) provides for two things (a) once an assessee is allowed deduction u/s 80 IA, “to the extent of such profits and gains” he is not to be allowed further deductions under Chapter-C and (b) in no case the deduction shall exceed the profits and gains of such eligible business of Undertaking. The expression “deduction to the extent of such profits” signifies that if an assessee is claiming benefit of deduction of a particular amount of profits and gains u/s 80 IA, to that extent profits and gains are to be reduced while calculating the deduction under Chapter VI A (C). The word “and” is disjunctive and means that the other provision is independent. The provision aims at achieving two independent objectives and cannot be limited to second objective alone thereby annihilating the first altogether and making it otiose. Even under the purposive interpretation, the purpose behind introducing s. 80IA (9) is to ensure that an assessee does not get deduction on the amount of profits and gains accorded in one provision. Hindustan Mint & Agro Products 315 ITR 401 & Rogini Garments 294 ITR (AT) 15 (Che) approved