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DATE: December 19, 2018 (Date of pronouncement)
DATE: December 26, 2018 (Date of publication)
AY: 2011-12
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CITATION:
S. 147 Reopening to assess Bogus share capital: Law explained whether allegation that assessee is a dummy concern used to route unaccounted money by way of bogus share application money is sufficient to reopen assessment (all imp judgements referred)

The respondents have stated that there are large number of dummy/bogus/shell/briefcase/paper entities including the petitioner/company in the group, which is being managed and controlled by Shri Anand Bangur for the purposes of routing unaccounted money and the department with great difficulties and after examining huge evidence, has arrived at a conclusion to initiate the proceedings against the petitioner and it is not a case where some unilateral action has been taken against the petitioner, it is a case where petitioner will receive every opportunity to defend himself and the entire mechanism has been provided under the Income Tax Act, 1961 and the respondents have prayed for dismissal of the writ petition.

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DATE: December 11, 2018 (Date of pronouncement)
DATE: December 24, 2018 (Date of publication)
AY: 2005-06
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CITATION:
S. 50C Capital Gains: The valuation of the stamp authority cannot be adopted for the purpose of collecting capital gain tax in the hands of the assessee if there is a long gap between the date of execution of the MOU and the execution of a formal development agreement

The assessee can be taxed only on the gain which is oozing out from the sale consideration, thus, no adverse inference can be drawn while invoking the provision of section 50C of the Act. No evidence has been produced by the Revenue at any stage that the assessee actually received the value which was adopted by the stamp valuation authority.

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DATE: December 12, 2018 (Date of pronouncement)
DATE: December 24, 2018 (Date of publication)
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CITATION:
S. 220(6) Stay of demand: If the assessee has exercised on time its statutory remedy of filing an appeal and also filed a stay petition, procedural fairness demands that the authorities may wait, before taking further steps, until the appellate authority decides on the stay petition

I reckon the petitioner has exercised on time its statutory remedy of filing an appeal. It appears that it has also filed a stay petition. Procedural fairness demands that the authorities may wait, before taking further steps, until the appellate authority decides on the stay petition

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DATE: December 20, 2018 (Date of pronouncement)
DATE: December 22, 2018 (Date of publication)
AY: 2014-15
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CITATION:
S. 92BA(i)/ 40A(2)(b) Domestic Transfer Pricing: Entire law on what constitutes "Specified Domestic Transactions” explained. The Dept's contention that a shareholder has beneficial interest in the assets of the company is contrary to all canons of Company law

We cannot, and the law does not permit us, to hold that HDFC Ltd. is the beneficial owner of 22.64% of the shares in the Petitioner by clubbing the share holding of HDFC Investments Ltd. with the shareholding of HDFC Ltd. If we were to do this, we would be effectively holding that HDFC Ltd., being a shareholder of HDFC Investments Ltd., is the beneficial owner of the shares which HDFC Investments Ltd. holds in the Petitioner. This, in law, is clearly impermissible because a shareholder of a company can never have any beneficial interest in the assets (movable or immovable) of that company. In the present case, if we were to accept the contention of the Revenue, it would mean that HDFC Ltd. is the beneficial owner of the shares which HDFC Investments Ltd. holds in the Petitioner. This would be contrary to all canons of Company Law. It is well settled that a shareholder of a company can never be construed either the legal or beneficial owner of the properties and assets of the company in which it holds the shares. This being the position in law, we find that the Revenue is incorrect in trying to club the shareholding of HDFC Investments Ltd. in the Petitioner along with the shareholding of HDFC Ltd. in the Petitioner, to cross the threshold of 20% as required in explanation (a) to section 40A(2)(b). We are supported in the view that we take by a decision of the Supreme Court in the case of Bacha F. Guzdar Vs. Commissioner of Income Tax [(1955) 27 ITR 1].

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DATE: October 25, 2018 (Date of pronouncement)
DATE: December 22, 2018 (Date of publication)
AY: 2007-08
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CITATION:
S. 147 Reopening: If the assessee's son contends in his assessment that certain investments belong to the assessee, that gives "reason to believe" to the AO to reopen the assessment. The subjective satisfaction of the AO has to seen and whether that satisfaction suffers from any perversity (Maniben Valji Shah 283 ITR 354 (Bom) distinguished)

The reopening of assessment u/s 147 on the basis of information in the form of observations of ITAT is on sound footing and which constitutes a tangible material for the purpose of reopening as the assessee did not file her return of income as required u/s 139(1) of the Act explaining the source of investment. Therefore, we are of the considered view that the reopening of assessment is on sound basis and there is no merits in the arguments of the assessee that the AO has reopened the assessment without any tangible material which suggests escapement of income within the meaning of section 147 of the Act

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DATE: (Date of pronouncement)
DATE: December 20, 2018 (Date of publication)
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CITATION:
S. 147 Reopening of s. 143(1) assessment: Law on whether reopening to assess alleged Bogus Capital gains from penny stocks is permissible explained in the context of Rajesh Jhaveri 291 ITR 500 (SC) & Zuari Estate 373 ITR 661 (SC)

In the present case the Assessing Officer has heard the material on record which would prima facie suggest that the assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of long term and short term capital gain. The company was prima facie found to be a shell company. The assessee had claimed exempt of long term capital gain of Rs.1.33 crores by way of sale of share of such company

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DATE: November 15, 2018 (Date of pronouncement)
DATE: December 12, 2018 (Date of publication)
AY: 2009-10
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CITATION:
S. 4/ 145: Law on accrual on income, matching concept & principles of Revenue Recognition as per Accounting Standards (AS-9, AS-22) explained in the context of sale of prepaid mobile cards (All important judgements referred)

Matching Concept is based on the accounting period concept. The paramount object of running a business is to earn profit. In order to ascertain the profit made by the business during a period, it is necessary that “revenues” of the period should be matched with the costs (expenses) of that period. In other words, income made by the business during a period can be measured only with the revenue earned during a period is compared with the expenditure incurred for earning that revenue. However, in cases of mergers and acquisitions, companies sometimes undertake to defer revenue expenditure over future years which brings in the concept of Deferred Tax Accounting. Therefore, today it cannot be said that the concept of accrual is limited to one year. It is a principle of recognizing costs (expenses) against revenues or against the relevant time period in order to determine the periodic income. This principle is an important component of accrual basis of accounting. As stated above, the object of AS 22 is to reconcile the matching principle with the Fair Valuation Principles. It may be noted that recognition, measurement and disclosure of various items of income, expenses, assets and liabilities is done only by Accounting Standards and not by provisions of the Companies Act

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DATE: November 16, 2018 (Date of pronouncement)
DATE: December 7, 2018 (Date of publication)
AY: 2011-12
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CITATION:
S. 147/ 148: A report of the Revenue audit party is merely information and opinion. It is not new or fresh or tangible material. If the reassessment notice is solely based on an audit opinion, it means it is issued on change of opinion which is not permissible

We find that the arguments on behalf of the petitioner are well founded and it must succeed. The audit report merely gives an opinion with regard to the non-availability of the deduction both under section 80-IA was not deducted from the profits of the business while computing deduction under section 80HHC. Clearly, therefore, there was no new or fresh material before the Assessing Officer except the opinion of the Revenue audit party. Since it is settled law that mere change of opinion cannot form the basis for issuing of a notice under section 147/148 of the Act, therefore, we do not propose to burden out judgment with the said judgments

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DATE: November 26, 2018 (Date of pronouncement)
DATE: December 3, 2018 (Date of publication)
AY: 2003-04, 2004-05
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CITATION:
S. 254(1): The ITAT should give independent reasons showing consideration of the submissions made on behalf of the assessee. An appellate order which affirms the order of the lower authority need not be a very detailed order. Nevertheless, there should be some indication in the order passed by the appellate authority of due application of mind to the contentions raised by the asseseee in the context of findings of the lower authority which were the subject matter of the challenge before it

We find that while discussing various issues, the Tribunal has not given any independent reasons showing consideration of the submissions made on behalf of the assessee. We are conscious of the fact that an appellate order which affirms the order of the lower authority need not be a very detailed order, nevertheless, there should be some indication in the order passed by the appellate authority, of due application of mind to the contentions raised by the asseseee in the context of findings of the lower authority which were the subject matter of the challenge before it. In view of above, the interest of justice would be served if the impugned order is quashed and set aside and the appeals are restored to the Tribunal for fresh consideration

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DATE: August 20, 2018 (Date of pronouncement)
DATE: November 16, 2018 (Date of publication)
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CITATION:
S. 254(2): (i) Mere pendency of appeal in the High Court does not preclude the Tribunal's power of rectification, (ii) Fact that there is difference of opinion between the two members of the Tribunal would, by itself, nor mean that the error sought to be rectified is not apparent on the record & (iii) The Tribunal has no jurisdiction to recall an order based on submissions made and upon consideration of materials on record. The power of rectification are circumscribed with the condition that the same can be exercised for correcting error be of law or facts apparent on record. The jurisdiction to correct errors vested in the Tribunal is not akin to review powers

Whatever be the correctness of these findings it cannot be stated that the Tribunal arrived at such findings without proper consideration of materials on record. Several issues were presented before the Tribunal and were examined before coming to such specific finding. The Tribunal could not have recalled the entire order under purported exercise of rectification powers. It is well settled through series of judgements of this Court and the Supreme Court that power of rectification are circumscribed with the condition that the same can be exercised for correcting error be of law or facts apparent on record. The jurisdiction to correct errors vested in the Tribunal is not akin to review powers. As noted, the Accountant Member, while showing inclination to exercise rectification powers, had not cited any reason in support of his opinion

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