S. 147: Bald statement that assessee has failed to make a full & true disclosure of material facts not sufficient. Details must be given as to which fact was not disclosed

It is true that the reasons for initiating re-assessment proceedings do in fact state that there was a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for its assessment. However, merely making this bald assertion was not enough. In Hindustan Lever Ltd. v/s R.B. Wadkar 268 ITR 332 it was held that the AO must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. On facts, there are no details given by the AO as to which fact or material was not disclosed by the Petitioner that led to it’s income escaping assessment. There is merely a bald assertion in the reasons that there was a failure on the part of the Petitioner to disclose fully and truly all material facts without giving any details thereof. This being the case, the impugned notice is bad in law and on this ground alone the Petitioner is entitled to succeed in this Writ Petition

S. 269SS/ 269T is not attracted to book entries not involving cash transactions

As the transactions of loans & advances were not cash transactions and were merely book entries by way of adjustment entries, there is no violation of Section 269SS/269T of the Act and no question of levy of penalty u/s 271D/ 271E.

Bar in S. 269SS/ 269T does not apply to loans/ advances accepted/ repaid via journal entries. Limitation period for s. 271D penalty is as per s. 275(1)(c) & not 275(1)(a)

(ii) On merits, no offence u/s 269SS is made out. S. 269SS applies to a transaction where a deposit or a loan is accepted by an assessee, otherwise than by an account payee cheque or an account payee draft. The section is restricted to transactions involving acceptance of money and not intended to affect cases where a debt or a liability arises on account of book entries. The object of the section is to prevent transactions in currency. This is also clearly explicit from clause (iii) of the explanation to s. 269SS which defines loan or deposit to mean “loan or deposit of money”. The liability recorded in the books of accounts by way of journal entries, i.e. crediting the account of a party to whom monies are payable or debiting the account of a party from whom monies are receivable in the books of accounts, is clearly outside the ambit of s. 269SS because passing such entries does not involve acceptance of any loan or deposit of money (Noida Toll Bridge Co Ltd 262 ITR 260 (Del) followed)

Proviso to s. 2(15) which denies exemption to a charitable institution carrying on commercial activities does not apply to institutions carrying out relief to the poor, education or medical relief but applies only to those carrying out “advancement of any other object of general public utility”

(iii) On the issue of the Proviso to s. 2(15), the same has been explained in Circular No.11/2008 dated 19/12/2008. From the said Circular it appears that the newly inserted proviso to s. 2(15) of the Act will apply to entities whose purpose is advancement of any other object of general public utility i.e. fourth limb of definition of ‘charitable purpose’ contained in s. 2(15) and hence such entities will not be eligible for exemption u/s 11 or u/s 10(23C) of the Act if they carry on commercial activities. The Proviso will not apply in respect of the first three limbs of s. 2(15) i.e. relief to the poor; education or medical relief. Thus, where the purpose of a trust or institution is relief of the poor; education or medical relief, it will constitute ‘charitable purpose’ even if it incidentally involves the carrying on of the commercial activities.

S. 50C: If the stamp duty valuation is higher than the consideration received, the AO must refer the valuation to the DVO even if there is no request by the assessee

No inference can be made that the assessee has accepted the price fixed by the District Sub Registrar for stamp duty purposes as the fair market value of the property because the assessee has nothing to do in the matter. Stamp duty is payable by the purchaser & it is for the purchaser to either accept it or dispute it. The assessee could not, on the basis of the price fixed by the Sub-Registrar, have claimed anything more than the agreed consideration of a sum of Rs.10 lakhs which, according to the assessee, was the highest prevailing market price. It would follow automatically that his case was that the fair market value of the property could not be Rs.35 lakhs as assessed by the District Sub Registrar. In a case of this nature the AO should, in fairness, have given an option to the assessee to have the valuation made by the Departmental Valuation Officer (DVO) contemplated u/s 50C. As a matter of course, in all such cases the AO should give an option to the assessee to have the valuation made by the DVO. The valuation by the DVO is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer, the AO, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law.

S. 263: The CIT can revise an assessment only if he can show unmistakably that the order of the AO is unsustainable. Fact that the AO has passed a non-speaking order does not mean that he has not applied his mind

(i) If the AO has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the AO in that case can be set aside in revision. It has to be shown unmistakably that the order of the AO is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power u/s 263 of the Act

High Court’s order on complaint of contempt by Judicial Member of ITAT against CA reveals sorry state of inter-se in-fighting between Hon’ble Members of the ITAT and members of the Bar

(i) The reference made by Hon’ble Sunil Kumar Yadav singly is not a reference by a subordinate court within the meaning of s. 15(2) of the Contempt of Courts Act for the reason that the other member of the division bench has not concurred with it. While this does preclude the Court from taking suo motu cognizance of alleged criminal contempt, the facts and circumstances do not make out a case for criminal contempt against the opposite parties. Certain startling facts are noted. One Bar Association passes a resolution against the conduct of one member of the ITAT whereas members of another Bar Association condemn the same and lodge the complaint against the other member of the ITAT. Both the members of the Tribunal did not concur in their views on various occasions. The complainant who is the Judicial Member of the ITAT has gone even to the extent of saying in his order that the Tribunal will not hear any appeal unless and until Bar Association passes the resolution condemning the particular act of an Advocate of moving the representation against him. The complainant has even observed in the said order that Bar Association should pass the resolution in a particular manner giving assurance that in case of decision in the any case, no such type of representation or complaint will be made to the President of ITAT and further that the protection be given from President of the ITAT with the assurance that such type of complaint/representation would not be entertained and erring Advocate will be dealt with severely. The said view expressed by the complainant-S.K. Yadav, who is Judicial Member of the ITAT, though was not agreed to by the other member, namely, B.R. Jain, Accountant Member, however, such observations, as the one made by the complainant in a judicial order are unacceptable. Further, the instructions issued by the complainant, in his capacity as senior member of the Tribunal to the Assistant Registrar, ITAT, Lucknow to obtain consent of the individual assessees in respect of the application moved by the opposite party No.1 regarding transfer of cases from Lucknow Bench to some other Bench, also does not appear to be a sound act on his part, if measured or judged on acceptable judicial standards;

S. 2(47)(v): Transfer under a development agreement takes place on handing over possession. Capital gains are chargeable to tax even if no consideration is received by assessee

The assessee’s contention that no transfer takes place on the date of the agreement and handing over of possession if consideration is not received by the assessee is not acceptable because s. 53A of the Transfer of Property Act, 1882, which is engrafted in the definition of “transfer” in s. 2(47) of the Income-tax Act does not contemplate any payment of consideration. Payment of consideration on the date of agreement of sale is not required. It may be deferred for a future date. The element of factual possession and agreement are contemplated as transfer within the meaning of the aforesaid section. When the transfer is complete, automatically, consideration mentioned in the agreement for sale has to be taken into consideration for the purpose of assessment of income for the assessment year when the agreement was entered into and possession was given. Here, factually it was found that both the aforesaid aspects took place in the previous year relevant to the assessment year 2003-04. Hence, the Tribunal has rightly held that the appellant is liable to pay tax on the capital gain for the assessment year.

Expl to s. 73: Speculation loss on transactions in derivatives can be set off against the gains of delivery shares

Under the Explanation to s. 73 where any part of the business of a company consists in the purchase and sale of shares of other companies, such company shall, for the purposes of the section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. Therefore, the entire transaction carried out by the assessee was within the umbrella of speculative transaction. There was, as such, no bar in setting off the loss arising out of derivatives from the income arising out of buying and selling of shares.

S. 14A disallowance cannot be made if the assessee has no tax-free income in the year

From the reading of s. 14A of the Act, it is clear that before making any disallowance the following conditions are to exist:- a) That there must be income taxable under the Act, and b) That this income must not form part of the total income under the Act, and c) That there must be an expenditure incurred by the assessee, and d) That the expenditure must have a relation to the income which does not form part of the total income under the Act. Therefore, unless and until, there is receipt of exempted income for the concerned assessment years (dividend from shares), s. 14A of the Act cannot be invoked (Hero Cycles 323 ITR 518 (P&H) and Winsome Textile 319 ITR 204 (P&H) followed)