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DATE: March 28, 2018 (Date of pronouncement)
DATE: March 31, 2018 (Date of publication)
AY: 2006-07
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CITATION:
S. 68 Bogus share capital: The assessee set up a devise to introduce unaccounted money through various shell companies in the form of share capital at a premium. The manner of issue of the shares through these companies, the manner of providing confirmation on the letter pad, the manner of maintaining the annual accounts and the manner of submitting the bank accounts on the letter pad or on a computerized print out to give it a semblance of originality to defraud the revenue shows the whole picture how the accommodation entries are routed through shell companies as share capital to evade taxes

The whole exercise carried out by the assessee is simply a devise to introduce unaccounted money through various shell companies in the form of share capital at a premium. The manner of issue of the shares through these companies, the manner of providing confirmation on the letter pad, the manner of maintaining the annual accounts and the manner of submitting the bank accounts on the letter pad or on a computerized print out to give it a semblance of originality to defraud the revenue, proves much more than what is under challenge before us. It shows the whole picture how the accommodation entries are routed through shell companies as share capital to evade the taxes. The whole façade created by assessee shows the real purpose of introducing the unaccounted money of the assessee without payment of taxes

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DATE: February 28, 2018 (Date of pronouncement)
DATE: March 29, 2018 (Date of publication)
AY: 2012-13
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CITATION:
Family Arrangement: It is not necessary for the validity of a family arrangement that there must be existing legal claims & disputes between the family members. The possibility of future disputes is sufficient. Family settlements entered into bona fide to maintain peace and harmony in the family are valid and binding on the authorities

Though conflict of legal claims in present or in future is generally a condition for the validity of a family arrangement, it is not necessarily so. Even bona fide disputes, present or possible, which may not involve legal claims will suffice. Members of a joint Hindu family may, to maintain peace or to bring about harmony in the family, enter into such a family arrangement. If such an arrangement is entered into bona fide and the terms thereof are fair in the circumstances of a particular case, Courts will more readily give assent to such an arrangement than to avoid it

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DATE: March 9, 2018 (Date of pronouncement)
DATE: March 29, 2018 (Date of publication)
AY: 2006-07
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CITATION:
Entire law on what constitutes a "Sham transaction"/ "Colourable device" explained. The sale of shares in a pvt ltd co by the assessee to a relative (son) in order to book losses so as to set-off the capital gains from on sale of property cannot be rejected as a sham transaction / colourable device if the transaction is within the four corners of law and valid

The transactions being genuine, merely because the assessee has claimed set-off of capital loss against the capital gain earned during the same period, cannot be said to be a colourable device or method adopted by assessee to avoid the tax. The shares were transferred by executing share transfer Form and after paying the requisite Stamp duty. The company NTPL also passed a Board Resolution for transfer of those shares. The consideration of share was effected to through banking channel. The fair market value arrived by assessee, as furnished before Commissioner (Appeals). In our view the transactions of sale of share were genuine and transacted at a proper valuation. The lower authority has not disputed the genuinity of transaction. The transactions carried by assessee are valid in law, cannot be treated as non-est merely on the basis of some economic detriment or it may be prejudicial to the interest of revenue

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DATE: February 28, 2018 (Date of pronouncement)
DATE: March 26, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Bogus share capital: The fact that a pvt. ltd co issued shares at an exorbitant premium is irrelevant if the assessee has proved the genuineness of the transaction. If the assessee has furnished necessary evidence to prove the identity of the share applicants and their PAN details, the department is free to proceed to reopen the individual assessments of the share applicants but it cannot be regarded as undisclosed income of the assessee

As regards the AOs observation with regard to the issue of shares at a face value of Rs.10/- issued at a premium of Rs.990 per share, we find that there is no merit in the findings of the AO for the reason that the issue of shares at a premium and subscription to such shares is within the knowledge of the company and the subscribers to the share application money and the AO does not have any role to play as long as the assessee has proved genuineness of transactions

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DATE: March 22, 2018 (Date of pronouncement)
DATE: March 26, 2018 (Date of publication)
AY: 2011-12
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CITATION:
Gains from Penny Stocks: If the purchase of shares has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding them, the transaction is an "adventure in the nature of trade" and the gains are assessable as "business profits" and not as "short-term capital gains"

In cases where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factory and unless it is offset by the present of other factors it would raise a strong presumption that the transaction is an adventure in the nature of trade

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DATE: March 23, 2018 (Date of pronouncement)
DATE: March 26, 2018 (Date of publication)
AY: 2006-07
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CITATION:
Transfer Pricing: CBDT's Instruction No. 3/2003 is binding on the AO. Consequently, the ALP of international transactions where the quantum is less than Rs. 5 crore has to be determined by the AO and cannot be referred to the TPO. If such reference is made, it is invalid and the extended time for completing the assessment is not available to the AO. The assessment is void as it is time-barred

At the time of hearing the Ld. AR has taken a ground which is on legal point that as per the Instruction No. 3/2003 issued by the CBDT, the Assessing Officer should have decided the issue of international transaction himself instead of referring it to Transfer Pricing Officer as the quantum of International Transaction is below the monetary limit of Rs.5 crore. Prima facie, it appears that the contention of the Ld. AR is supported by the Instruction No. 3/2003

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DATE: March 19, 2018 (Date of pronouncement)
DATE: March 24, 2018 (Date of publication)
AY: 2014-15
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CITATION:
Bogus Capital gains from penny stocks: Capital gains from penny stocks cannot be assessed as unexplained cash credit u/s 68 if the assessee has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not found any fault with it. The fact that the investigation dept has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated

I further note that the addition in dispute made by the AO and upheld by the Ld. CIT(A) u/s 68 as unexplained credit instead of long term capital gain as claimed by the assessee, however, the source, identity and genuineness of the transaction having been established by documentary evidences and there is no case for making addition u/s 68 of the Act, hence, the same deserve to be deleted. I note that in most of the case laws of the Hon’ble High Courts referred by the Ld. DR the reason on the basis of addition was confirmed was that the assessee had not tendered cogent evidence with regard to share transaction, however, in the present the case assessee has submitted all the documents / evidences, therefore, the case laws relied by the Ld. DR are based on distinguished facts and circumstances

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DATE: March 15, 2018 (Date of pronouncement)
DATE: March 24, 2018 (Date of publication)
AY: 2009-10
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CITATION:
S. 271(1)(c) Penalty: The primary burden of proof is on the Revenue to show that the assessee is guilty of concealment/ furnishing inaccurate particulars. Making an incorrect claim does not tantamount to furnishing inaccurate particulars by any stretch of imagination. Wrong claim of depreciation by crediting capital subsidy to reserves instead of reducing from actual cost/ WDV does not attract s. 271(1)(c) penalty

The expression “has concealed the particulars of income” and “has furnished inaccurate particulars of income” have not been defined either in sec. 271(l)(c) or elsewhere in the Act. One thing is certain that these two circumstances are not identical in details although they may lead to same effect, namely, keeping of a certain portion of income. The former is direct and the later may be indirect in its execution. The word “conceal” is derived from the Latin word “concolare” which implies to hide. In the present appeal, even if a excess depreciation has been claimed by the assessee on the basis of the Companies Act does not mean that the assessee had hidden something, therefore, even if a wrong claim is made, automatically, does not tantamount to furnishing inaccurate particulars. Concealment refers to a deliberate act on the part of the assessee. The primary burden of proof is on the Revenue, before a penalty is imposed u/s 271(l)(c) because by no stretch of imagination, making a incorrect claim, does not tantamount to furnishing inaccurate particulars, therefore, keeping in view the totality of facts and the judicial pronouncements, that too from the Hon’ble Apex Court, no penalty is leviable especially when there is no finding that any details supplied by the assessee in its return is erroneous or incorrect, therefore, mere making a excess claim in itself does not invite imposition of penalty u/s 271(l)(c) because the same cannot amount to furnishing inaccurate particulars

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DATE: March 12, 2018 (Date of pronouncement)
DATE: March 21, 2018 (Date of publication)
AY: 2011-12
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CITATION:
S. 10A/ 10B: The bar in s. 92CA(4) that the assessee is not entitled to s. 10A/ 10B deductions in respect of transfer pricing adjustments applies only where the adjustment is made by the AO/ TPO. If the assessee suo motu makes the adjustment and offers higher income, s. 10A/10B deduction cannot be denied. Also, as such notional income is not "export turnover", the condition in s. 10A/10B that foreign exchange must be brought to India does not apply (Deloitte Consulting (ITAT Mum) not followed as it is contrary to iGate Global (Kar HC))

There is no dispute in the minds of authorities below that it is profits of business. Such profit of business is neither export turnover nor the total turnover of assessee but is artificial income which needs to be taxed in the hands of assessee. Consequently, we hold that the said artificial income cannot be part of export turnover or total turnover though it will be part of profits of business. Simile which follows is that in the absence of it being offered as export turnover or total turnover, then there could not be any condition for getting foreign exchange to India. The assessee has computed the additional income by following the transfer pricing provisions and has offered the same to tax as its business profits. Once it has been so offered to tax, it forms part of profits of business and while computing the deduction under section 10A(4) of the Act, the said profits have to be taken into consideration and the deduction so computed

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DATE: March 8, 2018 (Date of pronouncement)
DATE: March 21, 2018 (Date of publication)
AY: 2006-07
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CITATION:
S. 143(2) Notice: The issue of a s. 143(2) notice by an AO not having jurisdiction over the assessee is irrelevant. If the proper AO does not issue the notice within the time limit, the assessment is null and void. The argument that the non-jurisdictional AO issued the s. 143(2) notice as per PAN or computerized system or internal procedure is not relevant as it violates the law

The contention of the Ld. D.R. has no merit that ITO, Ward-1(1), Faridabad was empowered to issue notice as per PAN or it was issued as per Computerized System of the Department because it is against the provisions of Law. As such the issue would be in violation of the principles of law and as such the internal procedure provided by the department would not justify the illegality committed by the ITO, Ward-1(1), Faridabad

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