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DATE: January 23, 2018 (Date of pronouncement)
DATE: January 27, 2018 (Date of publication)
AY: -
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S. 279(2): Entire law on the compounding of offenses u/s 276C, 277 read with S. 278D explained in the context of whether the CBDT Guidelines on compounding of offenses dated 23.12.2014 prescribing eligibility conditions and the formula for calculating the compounding fee are valid or unreasonable

The petitioner having voluntarily agreed and undertaken to the department to pay the compounding charges and to withdraw his appeal, ought to be directed to be bound down by the same. It is a settlement process voluntarily invoked by the petitioner in order to escape criminal prosecution under the Act. Since an accused may have to suffer severe consequences for non-payment of tax, if he is held to be guilty, it is not open to him to challenge the reasonableness of the same. The petitioner had consciously undertaken to abide by the decision of the Committee constituted for compounding the offences

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DATE: August 22, 2016 (Date of pronouncement)
DATE: January 9, 2018 (Date of publication)
AY: 2007-08
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CITATION:
S. 271(1)(c) Penalty: In the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 to s. 271(1)(c) in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute. It might lead to a rather peculiar situation where the assessees who might otherwise accept such determination may be forced to litigate further to escape the clutches of Explanation 7

The Court is also of the opinion that in the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute. It might lead to a rather peculiar situation where the assessees who might otherwise accept such determination may be forced to litigate further to escape the clutches of Explanation 7

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DATE: November 23, 2017 (Date of pronouncement)
DATE: November 30, 2017 (Date of publication)
AY: 2007-08
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CITATION:
S. 276C/277 Prosecution: Submission that claim of depreciation on land was a “mere clerical mistake” is not acceptable if the assessee did not file a revised return to correct the alleged mistake. A claim in a return which is scrutinized by the auditors and the directors cannot be considered as a mere accounting mistake

It is a manifest procedure that before filing of the Income Tax return for the assessment year 2007-2008 by the petitioner, the same is scrutinized, firstly, by the auditors of the company. Secondly, by the directors of the company before endorsing their signatures on the final Balance Sheet. Therefore, it cannot be considered as a mere accounting mistake

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DATE: November 13, 2017 (Date of pronouncement)
DATE: November 25, 2017 (Date of publication)
AY: 2012-13
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CITATION:
S. 264 Revision: Powers and duties of the CIT while dealing with a revision application filed by an assessee explained

Commissioner cannot refuse to entertain a revision petition filed by the assessee under Section 264 of the Act if it is maintainable on the ground that a similar issue has arisen for consideration in another year and is pending adjudication in appeal or another forum. Negative stipulations are clearly not attracted. When a statutory right is conferred on an assessee, the same imposes an obligation on the authority. New and extraneous conditions, not mandated and stipulated, expressly or by implication, cannot be imposed to deny recourse to a remedy and right of the assessee to have his claim examined on merits

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DATE: November 8, 2017 (Date of pronouncement)
DATE: November 11, 2017 (Date of publication)
AY: -
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CITATION:
S. 145(2) ICDS: S. 145 (2) has to be read down to restrict power of the Central Government to notify ICDS that do not seek to override binding judicial precedents or provisions of the Act. If s. 145 (2) is not so read down it would be ultra vires the Act and Article 141 read with Article 144 and 265 of the Constitution. The ICDS which overrule the provisions of the Act, the Rules thereunder and the judicial precedents applicable thereto, are struck down as ultra vires the Act. To that extent, Notification Nos. 87 and 88 dated 29.09.2016 and Circular No. 10 of 2017 issued by the CBDT are also held to be ultra vires the Act and struck down as such

Section 145 (2), as amended, has to be read down to restrict power of the Central Government to notify ICDS that do not seek to override binding judicial precedents or provisions of the Act. The power to enact a validation law is an essential legislative power that can be exercised, in the context of the Act, only by the Parliament and not by the executive. If Section 145 (2) of the Act as amended is not so read down it would be ultra vires the Act and Article 141 read with Article 144 and 265 of the Constitution. The ICDS is not meant to overrule the provisions of the Act, the Rules thereunder and the judicial precedents applicable thereto as they stand. ICDS I which does away with the concept of ‘prudence’ is contrary to the Act and binding judicial precedents and is therefore unsustainable in law.

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DATE: November 8, 2017 (Date of pronouncement)
DATE: November 11, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 263 Revision: The failure to issue notice on any particular issue does not vitiate the exercise of power u/s 263, as long as the assessee is heard and given opportunity. The lack of opportunity at the revisional stage does not vitiate the entire order, or the proceedings. It is a curable defect. The CIT has power to consider all aspects which were the subject matter of the AO’s order, if in his opinion, they are erroneous, despite the assessee’s appeal on that or some other aspect

It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed

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DATE: September 18, 2017 (Date of pronouncement)
DATE: October 3, 2017 (Date of publication)
AY: 2009-10
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CITATION:
Transfer Pricing: Steps to be undertaken in identification of comparable transactions/entities while fixing the ALP and the margin explained. Though the TNMM method allows broad flexibility tolerance in the selection of comparables, broad functionality is not sufficient to find the comparable entity. There must be similarity with the controlled transaction

In so far as identifying comparable transactions/entities is concerned, the same would not differ irrespective of the transfer pricing method adopted. In other words, the comparable transactions/entities must be selected on the basis of similarity with the controlled transaction entity. Comparability of controlled and uncontrolled transactions has to be judged, inter alia, with reference to comparability factors as indicated under rule 10B(2) of the Income Tax Rules, 1962. Comparability analysis by the transactional net margin method may be less sensitive to certain dissimilarities between the tested party and the comparables. However, that cannot be the consideration for diluting the standards of selecting comparable transactions/entities. A higher product and functional similarity would strengthen the efficacy of the method in ascertaining a reliable arm’s length price. Therefore, as far as possible, the comparables must be selected keeping in view the comparability factors as specified. Wide deviations in profit level indicator must trigger further investigations/analysis

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DATE: September 25, 2017 (Date of pronouncement)
DATE: October 3, 2017 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: A giant risk taking company like Infosys Technologies with huge significant intangibles and having huge assets leading to the exorbitant turnover is not comparable with a captive unit which is subject to minimum/ limited risk. The fact that the functional profile of Infosys is similar to that of the assessee is irrelevant

When we examine the profile of the assessee company vis-à-vis Infosys Technologies Limited in the light of the judgment in CIT vs. Agnity India Technologies Pvt. Ltd. (supra), there is no comparability for benchmarking the international transactions for the reasons inter alia that Infosys Technologies Limited is a giant risk taking company whereas, on the other hand, the assessee is a captive unit of its parent company and prone to minimum/ limited risk; that the Infosys Technologies Limited is having huge significant intangibles and having huge assets leading to the exorbitant turnover; that it is not in dispute that functional profile of assessee company and CIT vs. Agnity India Technologies Pvt. Ltd. is similar

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DATE: September 25, 2017 (Date of pronouncement)
DATE: September 29, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 147/ 148: Despite numerous judgements on the reopening of assessments, the Revenue authorities are repeating the same errors. Accordingly, Guidelines are laid down and the Revenue is directed to adhere to them

Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments

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DATE: September 6, 2017 (Date of pronouncement)
DATE: September 25, 2017 (Date of publication)
AY: 2002-03
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CITATION:
Search assessment u/s 153C: Proceedings u/s 153C of the Act can be initiated against a person only if the seized materials "belongs" to that person. It is not sufficient for the Revenue to urge that the seized document "pertains" to the person. Sinhgad Technical Education Society [2017] 84 Taxmann.com 290 (SC) followed

The recent decision of the Supreme Court in Commissioner of Income Tax, Pune v. Sinhgad Technical Education Society [2017] 84 taxmann.com 290 (SC) settles the legal position in favour of the Assessees. The Supreme Court, while affirming the judgment of the Bombay High Court, approved the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. Commissioner of Income Tax-III, (2013) 263 CTR (Guj) 362 that a document seized ‘should belong to a person other than the person referred to in Section 153A of the Act’. It has been categorically observed by the Supreme Court that the above position of law laid down by the Gujarat High Court is correct. Consequently, this Court rejects the contention of the learned counsel for the Revenue that even prior to 1st June 2015 at the stage of initiation of proceedings under Section 153C of the Act, it is sufficient if the seized document ‘pertained to’ the other person and it is not necessary to show that the seized material ‘belonged to’ the other person

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