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DATE: October 23, 2019 (Date of pronouncement)
DATE: December 28, 2019 (Date of publication)
AY: 2012-13
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CITATION:
S. 147 Reopening for taxing bogus share application money: One is known by the company one keeps. As the investors have dubious character & are known to have engaged in the business of providing accommodation entries., the genuineness of their transactions with the assessee has come under serious cloud, giving rise to reasonable belief in the mind of the AO that the assessee may have indulged in a dubious transaction to launder its undisclosed income. The fact that the assessee produced evidence during assessment is neither here nor there (NRA Iron & Steel 412 ITR 161 (SC) followed). Costs of Rs. 2L imposed on assessee for wasting Court's time

It is true that during the course of the assessment proceedings, the Assessing Officer had required the assessee to disclose information pertaining to the share applicants, the amounts and their source, the mode in which payment was made and confirmatory letters together with PAN details. But it is also trite law that for such cases three important aspects have to be considered by the Assessing Officer, namely (i) the identity of the investors; (ii) the credit worthiness of the applicants; and (iii) the genuineness of the transaction. Ex-facie, the order of assessment which was passed by the Assessing Officer under Section 143(3) does not indicate that the Assessing Officer had brought his mind to bear on either of these aspects

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DATE: February 25, 2019 (Date of pronouncement)
DATE: March 1, 2019 (Date of publication)
AY: -
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CITATION:
S. 254(2): The conduct of the assessee was speculative. It is not an uninformed litigant. it calculatedly chose not to question the rejection of its cross objection. Instead, waiting for the time till the two members who decided the first ITAT orders were not available and choosing to prefer the rectification application at a convenient time, the assessee no doubt technically was compliant, but stood exposed to the odium of forum shopping. ITAT's MA order reversed with costs of Rs. 1.5 Lakh imposed on the assessee

This court is of the opinion that the conduct of the assessee was speculative, to put it mildly. As observed earlier, it is not an uninformed litigant; it calculatedly chose not to question the rejection of its cross objection (on grounds of its having been rendered infructuous). Having waited more than a year after the decision of this court (which was rendered on 21-12-2012), it approached the ITAT in 2014. It offered no explanation why it did not seek the rectification earlier, during the pendency of the revenue’s appeal- in that event, if the ITAT had rejected its application this court would have given suitable directions. Instead, waiting for the time till the two members who decided the first ITAT orders were not available and choosing to prefer the rectification application at a convenient time, the assessee no doubt technically was compliant, but stood exposed to the odium of forum shopping

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DATE: May 31, 2018 (Date of pronouncement)
DATE: June 13, 2018 (Date of publication)
AY: 1995-96
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CITATION:
S. 282/ 292B: Entire law on "service of notice" and difference between "issue" and "service" of notice explained. S. 147 proceedings are initiated when the notice is "issued". Though "service" of notice u/s 147/148 is not a mere procedural requirement, but a condition precedent for initiation of proceedings, the service upon a person who was not authorized to receive notice does not render the proceedings null and void if the assessee complied and entered appearance

A company being a juristic and a legal person, service cannot be in person on the Company, and has to be affected by sending the notice to the registered office or at the place of business. In the context of the present case, we would only observe that the object and purpose of service of notice was to inform and make the company aware that proceedings under Section 147/148 of the Act had been initiated. Initiation of proceedings under Section 147/148 of the Act was upon recording of reasons to believe and upon necessary approvals. Initiation to this extent was valid and not disputed and challenged.

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DATE: January 5, 2018 (Date of pronouncement)
DATE: January 20, 2018 (Date of publication)
AY: 2013-14
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CITATION:
S. 56(2)(vii) Taxability of gifts as income: Meaning of the term "relative" in the context of a Hindu Undivided Family (HUF), and whether if the donor is the mother of the Karta of the HUF, a gift by the mother to the HUF is a gift from a "relative" so as to avoid attracting tax liability explained. All judgements on the subject considered

As per explanation (d) in the definition of “property”, several types of assets are listed including shares and securities. It is not denied that assessee is an HUF, during the year it has received from mother of the Kaka of the assessee HUF a gift of 75,000 shares of a private limited company. Therefore, apparently the provisions of section 56 (2) applies in the case of the assessee. However, proviso to the above section provides that the above clause shall not apply to any sum of money or any property received from any “relative”. Therefore, if such sum or property is received from a “relative” it will not be chargeable to tax under that section. The explanation (e) defines “relatives” in case of a Hindu undivided family as any member thereof. Therefore, if the above assessee, HUF, receives any sum from any member of the HUF then such sum or property received by the HUF assessee will not be chargeable to tax. Therefore, the simple issue that arises to be examined that whether Mrs. Sneh Gupta is a member of the assessee HUF. If she is, then the gift of share is not chargeable to tax in the hands of assessee as income

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DATE: August 4, 2017 (Date of pronouncement)
DATE: August 16, 2017 (Date of publication)
AY: 1995-96
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CITATION:
S. 68 "Peak Credits": An accommodation entry provider wanting to avail the benefit of the 'peak credit' has to make a clean breast of all the facts within his knowledge concerning the credit entries in the accounts. He has to explain with sufficient detail the source of all the deposits in his accounts as well as the corresponding destination of all payments from the accounts. The assessee should be able to show that money has been transferred through banking channels from the bank account of creditors to the bank account of the assessee, the identity of the creditors and that the money paid from the accounts of the assessee has returned to the bank accounts of the creditors. The assessee has to discharge the primary onus of disclosure in this regard

The legal position in respect of an accommodation entry provider seeking the benefit of ‘peak credit’ appears to have been totally overlooked by the ITAT in the present case. Indeed, if the Assessee as a self-confessed accommodation entry provider wanted to avail the benefit of the ‘peak credit’, he had to make a clean breast of all the facts within his knowledge concerning the credit entries in the accounts. He has to explain with sufficient detail the source of all the deposits in his accounts as well as the corresponding destination of all payments from the accounts. The Assessee should be able to show that money has been transferred through banking channels from the bank account of creditors to the bank account of the Assessee, the identity of the creditors and that the money paid from the accounts of the Assessee has returned to the bank accounts of the creditors. The Assessee has to discharge the primary onus of disclosure in this regard

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DATE: January 11, 2017 (Date of pronouncement)
DATE: January 23, 2017 (Date of publication)
AY: 2001-02
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CITATION:
S. 147/ 151: The mere appending of the word "approved" by the CIT while granting approval u/s 151 to the reopening u/s 147 is not enough. While the CIT is not required to record elaborate reasons, he has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal

Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression ‘approved’ says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer

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DATE: May 27, 2016 (Date of pronouncement)
DATE: December 7, 2016 (Date of publication)
AY: 2006-07
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CITATION:
S. 282: Entire law on pre-requisites for valid service of notice and drawing of a presumption that the notice has been validly served explained

The presumption of valid service of notice can only be made if the Revenue successfully established that the aforementioned four conditions have been categorically and cumulatively fulfilled and complied. At the same time, we may also point out that the said presumption is not permissible which demolished the case of the Revenue based on presumption of valid service of notice at any of the four stages mentioned above

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DATE: December 10, 2015 (Date of pronouncement)
DATE: January 29, 2016 (Date of publication)
AY: -
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CITATION:
Controversy on whether s. 80-1A(9) mandates that the amount of profits allowed as deduction u/s 80-1A(1) has to be reduced from the profits of the business of the undertaking while computing deduction under any another provisions under heading C in Chapter VI-A of the Income-tax Act, 1961 referred to larger Bench

While Hon’ble Mr. Justice Anil R. Dave took the view that the judgement of the Delhi High Court in Great Eastern Exports v. Commissioner of Income-Tax2 [2011] 332 ITR 14 (Delhi) lays down the correct position in law and allowed the appeals of the Revenue, Hon’ble Mr. Justice Dipak Misra dissented and held that the law laid down by the Bombay High Court had in Associated Capsules Private Limited v. Deputy Commissioner of Income Tax and another [2011] 332 ITR 42 (Bom) lays down the correct position in law and dismissed the appeals of the Revenue. In view of difference of opinion, the matters have been referred to a larger Bench

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DATE: December 10, 2015 (Date of pronouncement)
DATE: January 1, 2016 (Date of publication)
AY: 2007-08
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CITATION:
CUP method can be applied by a comparing a pricing formulae, rather than the pricing quantification in amount. Rule 10AB inserted w.e.f. 01.04.2012 is beneficial in nature and so retrospective w.e.f. 01.04.2002

Rule 10B(1)(f) inserted vide notification dated 23rd May 2012 is not a residual method in the sense that it is not a condition precedent for the application of this method that all other methods set out in s. 92C (1)(a) to 92C(1)(e) and as elaborated under rule 10B(1)(a) to (e), must fail and only then this method can be applied. This method is at par with all other methods of determining the arm’s length price as set out in sections 92C(1)(a) to (f), and, in terms of Section 92C(2), the most appropriate method, referred to in Section 92C(1), “shall be applied, for determination of arm’s length price, in the manner prescribed”. Therefore, as long as the method covered by rule 10AB, which is duly covered by Section 92C(1) satisfies the test of being the ‘most appropriate method’, it can be applied to a fact situation. The expression ‘ price which….would have been charged on paid” is used in rule 10BA, dealing with this method, in this method the place of “price charged or paid”, as is used in rule 10B(1)(a), dealing with CUP method, such an expression not only covers the actual price but also the price as would have been, hypothetically speaking, paid if the same transaction was entered into with an independent enterprise. This hypothetical price may not only cover bonafide quotations, but it also takes it beyond any doubt or controversy that where pricing mechanism for associated enterprise and independent enterprise is the same, the price charged to the associated enterprises will be treated as an arm’s length price. In this view of the matter, the business model said to have been adopted by the assessee, in principle, meets the test of arm’s length price determination under rule 10BA as well

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DATE: October 14, 2015 (Date of pronouncement)
DATE: October 30, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 143(2)/ 292BB: Failure to issue a s. 143(2) notice renders the reassessment order void. S. 292BB saves a case of "non service" of the notice but not a case of "non issue"

The failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by referring to Section 292BB of the Act. Section 292BB applies insofar as failure of “service” of notice is concerned and not with regard to failure to “issue” notice. The non-issue of the said notice is fatal to the order of re-assessment

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