The Act makes a clear distinction between “issue of notice” and “service of notice”. S. 149 which prescribes the period of limitation provides that no notice u/s 148 shall be “issued” after the expiry of the limitation period. The “service” of the notice is necessary u/s 148 only to make the order of assessment. Once a notice is “issued” within the period of limitation, the AO has jurisdiction to make the assessment. A notice is considered to have been “issued” if it is placed in the hands of a person authorized to serve it, and with a bona fide intent to have it served. Service of the notice is not a condition precedent to conferment of jurisdiction on the AO but it is a condition precedent to the making of the order of assessment. On facts, as the AO had issued the notice within the period of limitation, he had jurisdiction to reopen the assessment (R.K.Upadhyay vs. Patel 166 ITR 163 (SC) followed)

The assessee transferred “Development Rights” being the FSI and the “right to load TDR” on the land. While the right to construct on the land by consuming FSI was a capital asset which was acquired at a cost, the right to load TDR arose pursuant to the DC Regulations, 1991 without payment of any cost. The said right to “load TDR” was an improvement to the “capital asset” held by the assessee. If the “cost of improvement” of an asset is not determinable, capital gains are not chargeable. The result was that even the consideration attributable to the FSI (which had a cost) was not assessable to tax. Principle laid down in Jethalal D. Mehta 2 SOT 422 (Mum) & Maheshwar Prakash CHS 24 SOT 366 (Mum) in the context of transfer of only TDR followed)

S.143(3) contemplates that the AO shall pass an order of assessment in writing. If the assessment order is signed then because the computation of tax is a ministerial act, ITNS-150 need not be signed by the AO. However, if the assessment order is not signed, then the fact that he has signed the tax computation form and the notice of demand is irrelevant. The omission to sign the assessment order cannot be explained by relying on s. 292B. If such a course is permitted to be followed than that would amount to delegation of powers conferred on the AO by the Act. Delegation of powers of the AO u/s 143(3) is not the intent and purpose of the Act. An unsigned assessment order is not in substance and effect in conformity with or according to the intent and purpose of the Act (Kilasho Devi Burman 219 ITR 214 (SC) followed; Kalyankumar Ray 191 ITR 634 (SC) explained)

Though the assessment was originally u/s 143(1), it is clearly evident from the recorded reasons that there was no new material coming to the possession of the AO on the basis of which the s. 143(1) assessment was reopened. In Telco Dadaji Dhackjee Ltd, the Third Member held, after considering Rajesh Jhaveri Stock Brokers 291 ITR 500 & Kelvinator of India 320 ITR 561 (SC), that a s. 143(1) assessment could not be reopened u/s 147 without there being any new material coming to the possession of the AO. As the AO had reopened the s. 143(1) assessment on the basis of the material which was already on record, the reopening was not valid.

Tribunal’s order is binding and failure to follow it is ‘Contempt of Court’ Though the Tribunal in the assessee’s own case held that exemption u/s 11 was available and the facts were identical, the CIT (A), for a subsequent year, …

M/s. Cargo Handling Private Workers Pool vs. DCIT (ITAT Vizag) Read More »

The argument that since the payee has already paid due tax on the income, s. 40(a)(ia) cannot be invoked is not correct. The law in Hindustan Coca Cola Beverage 293 ITR 226 (SC) that if the payee is assessed, the tax cannot be recovered from the payer was in the context of s.201 and pursuant to Circular No.275/201/95-IT dated 29-1-1997. In the absence of such circular in case of disallowance u/s 40(a)(ia), the principle laid down cannot be adopted for s. 40(a)(ia). As regards the principle that the department had accepted the position in the past, the defense is available for AY 2007-08 but not for AY 2008-09

S. 194H defines the expression “commission or brokerage” to include any payment received by a person acting on behalf of another person for services rendered or for any services in the course of buying or selling of goods …. Applying the principle of noscitur a sociis & ejusdem generis, the expression “commission” has to take its colour from the expression “brokerage”. As the expression “brokerage”, in common parlance and in law, means ‘fees or commission given to or charged by a broker’, the expression ‘commission’ must be confined to a payment made to agents etc for effecting sales and carrying out business transactions and cannot extend to payments which are for services rendered or products offered on a principal to principal basis. A principal-agent relationship is a sine qua non for invoking the provisions of s. 194 H. As there is no principal agent relationship between a bank issuing the bank guarantee and the assessee, the payment, though termed “commission”, is not covered by s. 194H (SRL Ranbaxy Ltd vs ACIT referred)

In principle, though the scope of “income” in s. 2(24) is very wide, a capital receipt is not chargeable to tax as income unless there is a specific provision to that effect. As the residential flat owned by the assessee in the society’s building was a capital asset in the hands of the assessee, the compensation was a capital receipt. The department’s argument that the cash compensation was a “share in profits earned by the developer” is not acceptable because it proceeds on the fallacy that the nature of payment in the hands of the payer determines the nature in the hands of the recipient. However, as the said receipt reduced the cost of acquisition of the new flat, it had to be taken into when computing the gains from a transfer thereof in the future

Under Rule 10D (4) the information and documents should as far as possible be contemporaneous and should exists latest by the ‘specified date’ specified in s. 92F (4) i.e. the due date for filing the ROI. There is no cut-off date upto which only the information available in public domain can be taken into consideration by the TPO while making the transfer pricing adjustments and arriving at the ALP. The assessee’s argument that s.92D and Rule 10D is defeated if the TPO takes the data which is available in the public domain after the specified date is not acceptable

In view of the two decisions of the Supreme Court which held the field when the return was filed, the claim was patently disallowable. The claim was also not discernible on the face of the record and the details of expenses had to be gone into in order to decipher the claim. The argument that the assessee does not have expertise in taxation matters and so it relied on expert opinion is not acceptable because the opinion was not furnished for accounting purposes. An accountant’s view is not really material for deciding the deductibility or otherwise of an expenditure. The assessee knew about the problem at the time of filing of return, but still made the claim. Not only this, the claim was pursued even up to the level of the CIT (A) in gross disregard for the decision of the Supreme Court, which the assessee came to know at least after receiving the assessment order. Therefore, the claim was not only wrong but also false and it was persisted with for some time. The fact that the assessee did not even seek explanation from the tax auditor or the CA gave the impression that the whole thing was a sham.