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DATE: December 22, 2017 (Date of pronouncement)
DATE: December 29, 2017 (Date of publication)
AY: 2014-15
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CITATION:
S. 147/ 292B: Sanction for issuing a reopening notice cannot be mechanical but has to be on due application of mind. Sanction accorded despite mention of non-existent section in the notice is prima facie evidence of non application of mind on the part of the sanctioning authority. S. 292B cannot cure such defect

There can be no dispute with regard to the application of Section 292B of the Act to sustain a notice from being declared invalid merely on the ground of mistake in the notice. However, the issue here is not with regard to the mistake / error committed by the Assessing Officer while taking a sanction from the Joint Commissioner of Income Tax but whether there was due application of mind by the Joint Commissioner of Income Tax while giving the necessary sanction for issuing the impugned notice. It is a settled principle of law that sanction granted by the higher Authority for issuing of a reopening notice has to be on due application of mind. It cannot be mechanical approval without examining the proposal sent by the Assessing Officer. Prima facie, it appears to us that if the Joint Commissioner of Income Tax would have applied his mind to the application made by the Assessing Officer, then the very first thing which would arise is the basis of the notice, as the provision of law on which it is based is no longer in the statute

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DATE: November 20, 2017 (Date of pronouncement)
DATE: December 23, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 2(47)(v): Immovable property can be regarded to have been transferred on the date of execution of the Development Agreement and irrevocable General Power of Attorney only if the terms indicate that complete control is given to the developer. If the entire consideration is not received by the assessee and physical possession of the property is not parted with, there is no transfer u/s 2(47)(v)

What binds this Court is that the judgment of the Division Bench in the case of Chaturbhuj Dwarkadas Kapadia v/s. Commissioner of Income Tax (2003) 260 ITR 491 (Bom). The Division Bench held that the date of contract is relevant provided the terms of the contract indicate passing off or transferring of complete control over the property in favour of the developer. The Division Bench laid down the test for determining the date which should be taken into account for determining the relevant accounting year in which the liability accrues. Admittedly, on the date of execution of the development agreement, the entire consideration was not received by the respondent assessee. The physical possession of the property subject matter of development agreement was parted with by the respondent assessee on 1st March, 2008. It was held that on that day, complete control over the property was passed on to the developer

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DATE: April 10, 2017 (Date of pronouncement)
DATE: December 16, 2017 (Date of publication)
AY: 2006-07
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CITATION:
Bogus LTCG from Penny stocks: The assessee has not tendered cogent evidence to explain how the shares in an unknown company worth Rs.5 had jumped to Rs.485 in no time. The fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise. the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. The gain has accordingly to be assessed as undisclosed credit u/s 68

The assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. While so observing, the authorities held that the assessee had not tendered cogent evidence to explain as to how the shares in an unknown company worth Rs.5/had jumped to Rs.485/in no time. The Income Tax Appellate Tribunal held that the fantastic sale price was not at all possible as there was no economic or financial basis as to how a share worth Rs.5/of a little known company would jump from Rs.5/to Rs.485/. The findings recorded by the authorities are pure findings of facts based on a proper appreciation of the material on record. While recording the said findings, the authorities have followed the tests laid down by the Hon’ble Supreme Court and this Court in several decisions

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DATE: November 28, 2017 (Date of pronouncement)
DATE: December 7, 2017 (Date of publication)
AY: 2005-06
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CITATION:
S. 80-IC: Entire law on concept of "initial assessment year" and "substantial expansion" explained. Also, law on interpretation of statutes which confer incentives for promoting development explained. Law on interpretation when there is doubt also explained. Law on whether CBDT Circulars are mere external aids in interpretation of a statute or more also explained

“substantial expansion” can be on more than one occasion. Meaning of expression “substantial expansion” is defined in clause [8(ix)] of Section 80-IC and with each such endeavour, if the assessee fulfills the criteria then there cannot be any prohibition with regard thereto. For what is important, in our considered view, is not the number of expansions, but the period within which such expansions can be carried out within the window period [7.1.2003 to 1.4.2012], and it is here we find the words “begun” or “begins” and “undertakes substantial expansion” during the said period, as stipulated under clause (b) sub-section 2 of Section 80- IC, to be of significance. The only rider imposed is by virtue of sub-section (6) of Section 80-IA, which caps the deduction with respect to Assessment Years to which a unit is entitled to

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DATE: August 22, 2017 (Date of pronouncement)
DATE: December 5, 2017 (Date of publication)
AY: 1987-88
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CITATION:
S. 271(1)(c) Penalty: The requirement to obtain previous approval of the IAC is mandatory as it is to safeguard the interests of the assessee against arbitrary exercise of power by the AO. Non-compliance may vitiate the penalty order. However, the requirement in s. 274 that the assessee must be given a reasonable opportunity of being heard cannot be stretched to the extent of framing a specific charge or asking the assessee an explanation in respect of the quantum of penalty proposed to be imposed

The provision of Section 271(1)(c)(iii) of the Income Tax does not attract the rule of presumption of mens rea and it cannot be equated with the provision in the Criminal Statute. The penalty is for default in complying with the provision, i.e. of furnishing true and correct particulars of the income in the return. The penalty is imposable for breach of the civil obligation. It is only the reasonable opportunity of being heard in the matter, which is required to be provided to the assessee. The enquiry seems to be of summary in nature, which does not even call for issuance of show cause notice in respect of the quantum of penalty proposed to be imposed. While exercising the discretion in respect of the quantum of penalty, the explanation furnished by the assessee to mitigate the rigour of penalty has to be considered, having regard to the intention of the assessee, if any, to evade the tax, as one of the factors

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DATE: July 13, 2017 (Date of pronouncement)
DATE: December 4, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 271(1)(c) penalty can be levied only where the charge is unequivocal and unambiguous. The AO must specify whether the charge is of concealment of particulars of income or furnishing of inaccurate particulars thereof and which one of the two is sought to be pressed into service. He is not permitted to club both by interjecting an ‘or’ between the two. The ambiguity in the show-cause notice compounded by the confused finding of the AO that he was satisfied that the assessee was guilty of both renders the proceedings void (K. P. Madhusudhanan 251 ITR 99 (SC) & MAK Data 358 ITR 593 (SC) distinguished

On principle, when penalty proceedings are sought to be initiated by the revenue under Section 271(1)(c) of the Act of 1961, the specific ground which forms the foundation therefor has to be spelt out in clear terms. Otherwise, an assessee would not have proper opportunity to put forth his defence. When the proceedings are penal in nature, resulting in imposition of penalty ranging from 100% to 300% of the tax liability, the charge must be unequivocal and unambiguous. When the charge is either concealment of particulars of income or furnishing of inaccurate particulars thereof, the revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both by interjecting an ‘or’ between the two, as in the present case

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DATE: July 11, 2017 (Date of pronouncement)
DATE: December 4, 2017 (Date of publication)
AY: -
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CITATION:
S. 194H, 201(1): An obligation to deduct TDS u/s 194H arises only if the relationship is that of "principal and agent" and if a "payment" is made. As the relationship between the assessee and the distributor was that of "principal to principal" and as the "discount" did not amount to a "payment", there was no liability to deduct TDS

Taking into account the provisions of Section 182 of the Contract Act and the arrangement which has been entered into between the company and the distributor and taking into account the provisions of Section 194H, the Tribunal while considering the evidence on record, in our considered opinion, has misdirected itself in considering the case from an angle other than the angle which was required to be considered by the Tribunal under the Income Tax Act. The Tribunal has travelled beyond the provisions of Section 194H where the condition precedent is that the payment is to be made by the assessee and thereafter he is to make payment. In spite of our specific query to the counsel for the department, it was not pointed out that any amount was paid by the assessee company. It was only the arrangement by which the amount which was to be received was reduced and no amount was paid as commission

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DATE: November 23, 2017 (Date of pronouncement)
DATE: November 30, 2017 (Date of publication)
AY: 2007-08
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CITATION:
S. 276C/277 Prosecution: Submission that claim of depreciation on land was a “mere clerical mistake” is not acceptable if the assessee did not file a revised return to correct the alleged mistake. A claim in a return which is scrutinized by the auditors and the directors cannot be considered as a mere accounting mistake

It is a manifest procedure that before filing of the Income Tax return for the assessment year 2007-2008 by the petitioner, the same is scrutinized, firstly, by the auditors of the company. Secondly, by the directors of the company before endorsing their signatures on the final Balance Sheet. Therefore, it cannot be considered as a mere accounting mistake

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DATE: April 10, 2017 (Date of pronouncement)
DATE: November 28, 2017 (Date of publication)
AY: -
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CITATION:
S. 68 Bogus share capital: Companies which invest share capital cannot be treated as bogus if they are registered and have been assessed. Once the assessee has produced documentary evidence to establish the existence of such companies, the burden shifts to the Revenue to establish their case. Reliance on statements of third parties who have not been subjected to cross examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individuals contrary to such public documents

This Court in the Judgments relied upon by the learned Counsel appearing for the Respondents, have come to the conclusion that once the Assessee has produced documentary evidence to establish the existence of such Companies, the burden would shift on the Revenue-Appellants herein to establish their case. In the present case, the Appellants are seeking to rely upon the statements recorded of two persons who have admittedly not been subjected to cross examination. In such circumstances, the question of remanding the matter for re-examination of such persons, would not at all be justified. The Assessing Officer, if he so desired, ought to have allowed the Assessee to cross examine such persons in case the statements were to be relied upon in such proceedings. Apart from that, the voluminous documents produced by the Respondents cannot be discarded merely on the basis of two individuals who have given their statements contrary to such public documents

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