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DATE: April 8, 2019 (Date of pronouncement)
DATE: April 9, 2019 (Date of publication)
AY: 1999-00
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CITATION:
S. 147 Reopening: High Court should decide (i) validity of s. 148 notice where assessment is made u/s 143(1) & not u/s 143(3), (ii) whether notice can be said to be based on change of opinion if there is no foundation to form any such opinion, (iii) Whether requirements of s. 148 are satisfied, namely, that it contains the facts constituting the "reasons to believe" and furnishes the necessary details for assessing the escaped income and (iv) whether finding recorded by ITAT on merits is legally sustainable

The objections raised by the respondent (assessee) to the notice contending inter alia that since the impugned notice was based on “change of the opinion” and hence bad in law was upheld by the ITAT resulting in allowing the respondent’s appeal and further by dismissing the Revenue’s appeal by the High Court. The Revenue has felt aggrieved by the order of the High Court dismissing their appeal in limine and has filed the present appeal by way of special leave in this Court

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DATE: March 26, 2019 (Date of pronouncement)
DATE: April 9, 2019 (Date of publication)
AY: -
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S. 142(2C) Special Audit/ Interpretation of statutes: The AO who has fixed the time in the first instance must necessarily, as an incident of the authority to fix time, be entitled to suo moto extend time without an application by the assessee. The amendment by FA 2008 was intended to remove an ambiguity and is clarificatory in nature. There exists a presumption of retrospective application in regard to amendments which are of a procedural nature

The issue as to whether the amendment which has been brought about by the legislature is intended to be clarificatory or to remove an ambiguity in the law must depend upon the context. The Court would have due regard to (i) the general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what power that the legislature contemplated

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DATE: February 8, 2019 (Date of pronouncement)
DATE: April 6, 2019 (Date of publication)
AY: -
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CITATION:
S. 14A/ Rule 8D: In the absence of any exempt income, disallowance u/s 14A & Rule 8D of the Act of any amount is not permissible (Essar Teleholdings 401 ITR 445 (SC) followed, Cheminvest 378 ITR 33 (Del) approved)

In view of the decision of this Court in Commissioner of Income Tax 5, Mumbai vs. Essar Teleholdings Ltd. through its Manager [401 ITR 445 (SC)] (2018) 3 SCC 253, we see no reason to entertain this special leave petition under Article 136 of the Constitution of India

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DATE: March 1, 2019 (Date of pronouncement)
DATE: April 6, 2019 (Date of publication)
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CITATION:
Articles 136, 141: Entire law on legal effect of dismissal of a Special Leave Petition (SLP) by a speaking/ non-speaking order explained. If the dismissal is by a speaking order & reasons are given, the same is a declaration of law which is binding under Article 141. The findings are also binding by way of judicial discipline. However, this does not mean that the order of the lower court has merged in the dismissal order of the Supreme Court

If the order refusing leave to appeal is a speaking order, i.e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country. But, this does not amount to saying that the order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting the special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties

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DATE: January 2, 2019 (Date of pronouncement)
DATE: March 23, 2019 (Date of publication)
AY: 2003-04, 2004-05, 2005-06, 2006-07
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CITATION:
S. 14A/ 36(1)(iii): If the interest free funds available to the assessee are sufficient to meet its investment, it could be presumed that the investments are made from the interest free funds available with the assessee and not from borrowed funds

The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with the assessee

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DATE: March 12, 2019 (Date of pronouncement)
DATE: March 15, 2019 (Date of publication)
AY: -
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CITATION:
Defunct companies: The fact that the assessee company stands dissolved as a defunct company u/s 560(5) of the Companies Act, 1956 does not mean that income-tax proceedings & appeals become infructuous. The liability against such companies has to be dealt with in accordance with s. 506(5) proviso (a) of the Companies Act and Chapter XV of the Income Tax Act which deal with "liability in special cases" and "discontinuance of business or dissolution"

The High Court failed to notice Section 506(5) proviso (a) of the Companies Act and further failed to notice Chapter XV of the Income Tax Act which deals with “liability in special cases” and its clause (L) which deals with “discontinuance of business or dissolution”. The aforementioned two provisions, namely, one under the Companies Act and the other under the Income Tax Act specifically deal with the cases of the Companies, whose name has been struck off under Section 506 (5) of the Companies Act. These provisions provide as to how and in what manner the liability against such Company arising under the Companies Act and under the Income Tax Act is required to be dealt with

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DATE: March 5, 2019 (Date of pronouncement)
DATE: March 9, 2019 (Date of publication)
AY: -
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S. 37(1)/40A(2) Business expenditure vs. sharing of profit: The AO has to take into account the manner in which the business works, the modalities and manner in which SAP/additional purchase price/final price are decided and determine what amount forms part of the profit. Whatever is the profit component is sharing of profit/distribution of profit and the rest is deductible as expenditure

Merely because the higher price is paid to both, members and non-members, qua the members, still the question would remain with respect to the distribution of profit/sharing of the profit. So far as the non-members are concerned, the same can be dealt with and/or considered applying Section 40A (2) of the Act, i.e., the assessing officer on the material on record has to determine whether the amount paid is excessive or unreasonable or not

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DATE: March 1, 2019 (Date of pronouncement)
DATE: March 7, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 226 illegal Recovery - Strictures against DCIT: High Court was not justified in its remarks against the DCIT and in issuing directions that (i) ‘deadwood’ should be weeded out (ii) personal costs of Rs. 1.5 lakh should be imposed (iii) adverse entry should be made in the Annual Confidential Report (iv) Denial of promotion etc. The directions were wholly unnecessary to the lis before the Court & are expunged

We find merit in the submission which has been urged on behalf of the petitioner that the High Court was not justified in its remarks against the petitioner and in issuing the directions which it has issued. The High Court, in the course of its judgment has issued a slew of directions including: (i) The necessity of weeding out ‘deadwood’; (ii) imposition of costs of Rs. 1.5 lakhs which are to be apportioned among two officers, out of them being the petitioner; (iii) Making an adverse entry in the Annual Confidential Reports of the petitioner; and (iv) Denial of promotion including monetary benefits to the petitioner. Apart from the fact that these directions were issued without specific notice to the petitioner, we find that they were wholly unnecessary having regard to the lis before the High Court. We accordingly, expunge the adverse remarks made against the petitioner in the impugned judgment and order of the High Court as well as the directions issued against the petitioner

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DATE: March 1, 2019 (Date of pronouncement)
DATE: March 7, 2019 (Date of publication)
AY: 1979-80, 1980-81
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CITATION:
S. 80-HH/ 80-I/ 80-AB: There is a difference between 'income' referred to in s. 80-AB and 'profits & gains' referred in s. 80-HH/80-I. Deduction u/s 80-HH/ 80-I has to be computed on the ‘profits and gains’, without deducting therefrom ‘depreciation’ and ‘investment allowance’ & not from ‘income’ as computed under the Act. S. 80AB is prospective. Motilal Pesticides 243 ITR 26 (SC) reversed

Reading of Section 80HH along with Section 80A would clearly signify that such a deduction has to be of gross profits and gains, i.e., before computing the income as specified in Sections 30 to 43D of the Act. It is correctly pointed out by Division Bench in the reference order that in Motilal Pesticides case, the Court followed the judgment rendered in the M/s. Cloth Traders (P) Ltd. which was a case under Section 80M of the Act, on the premise that language of Section 80HH and Section 80M is the same. This basis is clearly incorrect as the language of two provisions is materially different. We are, therefore, of the considered opinion that judgment of Motilal Pesticides is erroneous. We, therefore, overrule this judgment.

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DATE: March 5, 2019 (Date of pronouncement)
DATE: March 6, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 68 Bogus share capital/ premium: The practice of conversion of un-accounted money through cloak of Share Capital/Premium must be subjected to careful scrutiny especially in private placement of shares. Filing primary evidence is not sufficient. The onus to establish credit worthiness of the investor companies is on the assessee. The Assessee is under legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee

The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee.

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