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DATE: February 11, 2019 (Date of pronouncement)
DATE: April 23, 2019 (Date of publication)
AY: -
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CITATION:
S. 68/69 Bogus Purchases: Even if the purchases are bogus, the entire purchase amount cannot be added. As the department had not disputed the assessee's sales & there was no discrepancy between the purchases and the sales, the purchases cannot be rejected without disturbing the sales in case of a trader. The addition has to be restricted to the extent of the G.P. rate on purchases at the same rate of other genuine purchases (N.K .Industries 292 CTR 354 (Guj), N. K. Proteins 250 TM 22 (SC) distinguished)

In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee’s additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee’s sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases

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DATE: July 31, 2018 (Date of pronouncement)
DATE: December 29, 2018 (Date of publication)
AY: 2008-09
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CITATION:
S. 22 ALV: If the assessee is a builder but is not engaged in the business of letting of property, the lease rent from unsold flats is assessable to tax under the head 'income from house property' (Sambhu Investment 263 ITR 143 (SC), Chennai Properties 373 ITR 673(SC), Rayala Corp 386 ITR 500 (SC) referred/ distinguished)

In the present facts it is undisputed that the respondent assessee is in the business of development of real estate projects and letting of property is not the business of the respondent assessee. In both the decisions relied upon by Mr. Pinto i.e. Chennai Properties (supra) and Rayala Corporation (supra), the Supreme Court on facts found that the appellant was in the business of letting out its property on lease and earning rent therefrom. Clearly it is not so in this case.

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DATE: April 11, 2018 (Date of pronouncement)
DATE: April 16, 2018 (Date of publication)
AY: 2008-09, 2009-10
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CITATION:
Strictures passed against Dept's Advocate for "most unreasonable attitude" of seeking to reargue settled concluded issues. This results in unnecessary wastage of the scarce judicial time available in the context of the large number of the appeals awaiting consideration. Dept's Advocate are expected to act with responsibility as an Officer of the Court and not merely argue for the sake of arguing when an issue is clearly covered by the decision of Co- ordinate Bench of the Court and take up scarce judicial time. Advocates must bear in mind that this is a Court of law and not an University/College debating Society, where debates are held for academic stimulation. We deal with real life disputes and decide them in accordance with the Rule of Law, of which an important limb is uniformity of application of law. This on the basis of judicial discipline and law of precedents

We are pained to record this most unreasonable attitude on the part of the Advocate for the Revenue of seeking to reargue settled concluded issues, without having obtained any stay from the Apex Court. This results in unnecessary wastage of the scarce judicial time available in the context of the large number of the appeals awaiting consideration. We would expect Mr. Chhotaray, as an Advocate to act with responsibility as an Officer of the Court and not merely argue for the sake of arguing when an issue is clearly covered by the decision of Co- ordinate Bench of the Court and take up scarce judicial time. The Advocate must bear in mind that this is a Court of law and not an University/College debating Society, where debates are held for academic stimulation. We deal with real life disputes and decide them in accordance with the Rule of Law, of which an important limb is uniformity of application of law. This on the basis of judicial discipline and law of precedents

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DATE: February 24, 2018 (Date of pronouncement)
DATE: March 8, 2018 (Date of publication)
AY: 2004-05
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CITATION:
Law on reopening u/s 147 pursuant to an audit objection opposed by the AO explained in the context of (i) the notice being silent on whether it was issued pursuant to the audit objection, (ii) there being a gap between the AO's opposition and the issue of notice and (iii) the reasons for reopening being supported by a subsequent Supreme Court judgement

The decision of the Apex Court in Liberty India (Supra) was rendered on 31st August 2009 and the notice seeking to reopen the Assessment year for Assessment Year 2004-05 was issued on 18th March 2009. Therefore, at the time when the reasons for issue of reopening notice was recorded by the Assessing Officer, he could not have had any reasonable belief on the basis of Apex Court decision in Liberty India (Supra) to come to a prima facie view that income chargeable to tax has escaped assessment. In this appeal we are concerned with the issue of jurisdiction of the Assessing Officer to issue the reopening notice and not with the merits of the dispute. Thus when the reopening notice was issued in March 2009, the Apex Court decision was not available and there was a divergence of views. This has to be read in the context of the Assessing Officer’s response to the audit objection on the above issue duly supported by case law

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DATE: July 18, 2017 (Date of pronouncement)
DATE: July 27, 2017 (Date of publication)
AY: 2004-05
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CITATION:
S. 115JB: The AO is not entitled to add to the "book profits" the amounts arising from sale of land which are directly credited to the Capital Reserve Account in the balance sheet rather than routing it through Profit and Loss Account in the manner provided as per Part II and Part III of Schedule VI to the Companies Act, 1956

The learned counsel for the Appellant submits that Tribunal was not justified in not accepting the reworking of the book profits by the Assessing Officer as per the provisions of Section 115JB of the Income Tax Act. The Assessee had directly credited the profit of Rs.2,84,84,000/ arising from sale of land to Capital Reserve Account in the balance sheet rather than routing it through Profit and Loss Account in the manner provided as per Part II and Part III of Schedule VI to the Companies Act, 1956

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DATE: September 19, 2016 (Date of pronouncement)
DATE: October 10, 2016 (Date of publication)
AY: 1993-94
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CITATION:
S. 147: Non-supply by the AO of reasons recorded for reopening the assessment (even where the reopening is prior to GKN Driveshafts 259 ITR 19 (SC)) renders the reassessment order bad as being without jurisdiction

An alternative submission is made on behalf of the Revenue that the obligation to supply reasons on the Assessing Officer was consequent to the decision of the Apex Court that GKN Driveshafts (India) Ltd. vs. Income-tax Officer (2003) 259 ITR 19 (SC) rendered in 2003 while, in the present case, the reopening notice is dated 9 December 1996. Thus it submitted at the time when the notice under Section 148 of the Act was issued and the time when assessment was completed, there was no such requirement to furnish to the assessee a copy of the reasons recorded. This submission is not correct. We find that the impugned order relies upon the decision of this Court in Seista Steel Construction (P.) Ltd. [1984] 17 Taxman 122(Bom.) when it is held that in the absence of supply of reasons recorded for issue of reopening notice the assessment order would be without jurisdiction and needs to be quashed. The above view as taken by the Tribunal has also been taken by this Court in CIT vs. Videsh Sanchar Nigam Ltd. [2012] 21 Taxmann 53 (Bombay) viz. non-supply of reasons recorded to issue a reopening notice would make the order of Assessment passed thereon bad as being without jurisdiction

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DATE: August 11, 2016 (Date of pronouncement)
DATE: August 20, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 37(1): Foreign exchange loss is not a "notional" or "speculation" loss and is allowable as a deduction. CBDT's Instruction No. 3 of 2010 which deals with foreign exchange derivative transactions (forward contracts) is not applicable to cases of losses in dealings with foreign exchange

The loss was not on account of derivatives but are in fact losses and gains in foreign exchange relating to the purchase and sales transactions i.e. creditors and debtors outstanding as on 31st March, 2010. Therefore, Instruction No.3 of 2010 issued by the CBDT would have no application to the facts of the present case. In fact, the issue arising herein would be covered by the principles laid down by the Apex Court in Woodward Governor India (P) Ltd. (supra). Accordingly, as the impugned order of Tribunal followed by the decision of the Apex Court in Woodward Governor India (P) Ltd. (supra) which governs the issue, the question as proposed does not give rise to any substantial question of law

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DATE: February 22, 2016 (Date of pronouncement)
DATE: April 20, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Mere non-introduction of interest-bearing funds is not sufficient to conclude that gains from sale of shares are not business income

There are various factors such as frequency, volume, entry in the books of accounts, nature of funds used, holding period etc. which are relevant in deciding the true nature of transactions and no single factor is conclusive. Thus, mere non-introduction of interest bearing funds will not alone determine the nature of the transactions. The impugned order, after analyzing the statement of capital gains which were available before it, came to the conclusion that most of the shares have been sold within 30 days of its purchase and upheld the order of the CIT(A)

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DATE: April 14, 2015 (Date of pronouncement)
DATE: May 5, 2015 (Date of publication)
AY: 2008-09
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CITATION:
No s. 14A and Rule 8D disallowance can be made for shares held as stock-in-trade

One can at best disallow the expenses which are incurred for earning dividend income. For that purpose, the figures under the head “Investment” could be taken and some charges apportioned for the purpose of computing the expenses

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DATE: January 28, 2015 (Date of pronouncement)
DATE: February 24, 2015 (Date of publication)
AY: 2005-06
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CITATION:
S. 147: S. 143(3) assessment order is not a scrap of paper & AO is expected to have applied his mind. Reopening on ground of "oversight, inadvertence or mistake" is not permissible

The argument that the AO has been careless in bringing to tax a particular amount which is chargeable to tax and that the Revenue should not be precluded from issuing notice u/s 148 overlooks the fact that power to reopen is not a power to review an assessment order. At the time of passing assessment order, it expected of the AO that he will apply mind and pass an order. An assessment order is not a mere scrap of paper. To accept the submission of the department would mean to negate the well settled position in law as stated by the Supreme Court in CIT Vs. Kelvinator of India Ltd 256 ITR 1 (Delhi)(FB) that the concept of ‘change of opinion’ brought in so as to have in built test to check abuse of power

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