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DATE: May 16, 2019 (Date of pronouncement)
DATE: June 1, 2019 (Date of publication)
AY: 2012-13
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CITATION:
S. 145(2) "Project Completion Method" vs. "Percentage Completion Method": Dept's argument that assessee should have declared profit on percentage completion method because according to AS-7, revised in 2002 with effect from 01.04.2003, the 'Completed Contract method' has been scrapped & ICAI guidelines prefer the percentage completion method is not acceptable (Realest Builders 307 ITR 202 (SC) distinguished, All judgements referred)

As regards to the adoption of project completion method of accounting by the assessee, it is seen that the assessee’s business came into existence from 11.03.2003 and since then it has been consistently following project completion method of accounting. The Ld. AR has contended that the assessee has never deviated from such method of accounting since the inception of the business and that the revenue had also accepted project completion method and profit shown by the assessee during the assessment proceedings for AY 2014-15 in assessee’s own case which also finds mention in para 6.2.1 of the order passed by Ld. CIT(A). It is well settled that the project completion method is one of the recognized method of accounting and as the assessee has consistently been followed such recognized method of accounting thus in the absence of any prohibition or restriction under the act for doing so, it can’t be held that the decision of the CIT(A) was erroneous or illegal in any manner. The judgement in the case of “CIT vs. Realest Builders & Services Ltd.”, (Supra) relied Id. DR on method of accounting is rather in favor of the assessee and against the revenue

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DATE: August 9, 2018 (Date of pronouncement)
DATE: October 5, 2018 (Date of publication)
AY: 1997-98
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S. 271(1)(c) Penalty: Law explained on whether penalty can be imposed where (i) income is added or disallowance is made on estimate basis, (ii) books of account cannot be produced for reasons beyond control, (iii) disallowance is made as per retrospective insertion of s. 37(1) Explanation & (iv) allegation regarding concealment vs. furnishing inaccurate particulars is vague & uncertain

Where income is estimated or disallowance of expenses i made on estimate basis, there can be no penalty. The raison d’etre for non-imposition of penalty in both the situations is that there is a lack of precision as to concealment of income or furnishing of inaccurate particulars of income. It is only an estimation shorn of any certainty or accuracy

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DATE: June 19, 2018 (Date of pronouncement)
DATE: July 10, 2018 (Date of publication)
AY: 2007-08
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S. 147/148: If there is nothing in the recorded reasons to suggest that the income chargeable to tax which has escaped assessment is Rs. one lakh or more, the notice issued u/s 148 of the Act beyond four years of the end of the relevant assessment year is invalid

The second point which is very important is that in regard to the cases falling under section 34(1A), action can be taken only where the income which has escaped assessment is likely to amount to Rs.1 lakh or more. In other words, it is only in regard to cases where the escaped income is of a high magnitude that the restriction of the period of limitation has been removed. Since no reasons were recorded that the escaped income is likely to be Rs.1 lac or more so that the Chief Commissioner or Commissioner may record his satisfaction under section 151, the initiation of reassessment proceedings after more than four years was clearly barred by time

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DATE: June 19, 2018 (Date of pronouncement)
DATE: July 7, 2018 (Date of publication)
AY: 2008-09
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S. 147/ 151: If the CIT merely states "Yes, I am satisfied" while granting sanction to the reopening, it means that the sanction is merely mechanical and he has not applied independent mind. There is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment (All judgements referred)

Apparently, from the approval recorded and words used that “Yes. I am satisfied.”, it has proved on record that the sanction is merely mechanical and Addl. CIT has not applied independent mind while according sanction as there is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment u/s 148 of the Act

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DATE: June 1, 2018 (Date of pronouncement)
DATE: June 2, 2018 (Date of publication)
AY: 2010-11
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S. 147/148: If the reopening is based on information received from the investigation dept, the reasons must show that the AO independently applied his mind to the information and formed his own opinion. If the reopening is done mechanically, it is void. Also, if the reasons refer to any document, a copy should be provided to the assessee. Failure to do so results in breach of natural justice and renders the reopening void

No independent application of mind by the AO to the material forming the basis of the reasons recorded is evincible from the reasons. The AO, in the reasons, has just stated the information received and his conclusion about the alleged escapement of income. As to what the AO did with the information made available to him, is not discernible from the reasons. The reasons must also paraphrase any investigation report, which may form the basis of the reasons and any enquiry conducted by the AO thereon, as also the conclusions thereof. Further where the reasons make a reference to any document, such document and / or relevant portion thereof must be enclosed along with the reasons

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DATE: April 11, 2018 (Date of pronouncement)
DATE: April 19, 2018 (Date of publication)
AY: 2010-11, 2011-12
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S. 9(1)(i)/ 40(a)(i): Entire law on whether commission paid by an Indian entity to foreign agents can be said to accrue in India and whether the assessee is obliged to deduct TDS thereon u/s 195 explained. All relevant judgements and CBDT Circulars Nos.7 dated 22.10.2009, 23 dated 23 July 1969, 163 dated 29th May 1975 and 786 dated 7th February 2000 considered

It is not disputed that that the withdrawal of the circulars No. 23 and 786 has been made on 22.10.2009 vide CBDT Circular No. 7 of 2009 and mere withdrawal of the circular does not negate the principles of income deemed to accrue or arise in India or outside India. The CBDT has not stated that any part of the circulars is contrary to law or that the circulars were wrongly issued or that the law has undergone changes holding their withdrawal. Thus, in respect of cases, which directly follow with the situations covered by the circulars, the liability to tax should continue to be in accordance with section 9 of the Act and its intent. The relevant sections, namely section 5(2) and section 9 of the Income-tax Act, 1961 not having undergone any change in this regard, the clarification in Circular No. 23 still prevails even after the withdrawal. No tax is therefore deductible under section 195 and consequently, the expenditure on export commission payable to a non-resident for services rendered outside India is not liable for withholding tax

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DATE: September 7, 2017 (Date of pronouncement)
DATE: January 5, 2018 (Date of publication)
AY: 2008-09
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CITATION:
S. 271(1)(c): Concealment of income and furnishing of inaccurate particulars are distinct and separate charges. A nebulous notice which contains both charges is null and void ab initio (All judgements on the topic relied upon by the assessee and the department have been referred to and discussed)

It is quite clear, that `suppressio vari’, or ‘suppression of truth’, which has, in section 271(1)(c) of the IT Act, as its equivalent, `concealment of income’, and `suggestio falsi’, literally, ‘suggesting or stating a falsehood’, which manifests itself as ‘furnishing of inaccurate particulars thereof, are two distinctly separate charges; that leveling of either of these charges has to be explicitly brought to the notice/knowledge of the assessee, sans which, the assessee, under a nebulous notice containing both these charges, is rendered incapable of defending the charge per se. This would be in utter violation of the principles of natural justice, such notice being null and void ab initio. It is also pertinent to note at this juncture that the notice u/s 274 is a mandatory statutory notice without which, the initiation of penalty proceedings would be nugatory, nay, non est in the eye of the law

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DATE: April 12, 2016 (Date of pronouncement)
DATE: May 4, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 271C: Concept of "Reasonable Cause" for avoiding levy of penalty for TDS default explained

“Reasonable cause” for the purpose of application of Section 271C in the backdrop of Section 273B has been explained by the Hon’ble Delhi High Court in the case of Woodward Governors India (P) Ltd. Vs. CIT (2002) 253 ITR 0745 to mean a probable cause, an honest belief founded on reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinarily prudent and cautious man, placed in the position of the person concerned to come to the conclusion that same was the right thing to do. The cause should not be found to be frivolous, without substance or foundation

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DATE: April 5, 2016 (Date of pronouncement)
DATE: April 15, 2016 (Date of publication)
AY: 2003-04
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CITATION:
S. 147/ 148: Law laid down in Jet Airways India 331 ITR 236 and Ranbaxy 336 ITR 136 that if AO does not make any addition for the reason stated for reopening, he cannot add any other income holds good even for years when Explanation 3 to s. 147 is operative

The argument of the Ld. DR that the ratio propounded in Jet Airways India vs. CIT 331 ITR 236 and Ranbaxy Laboratories Ltd. vs. CIT(2011) 336 ITR 136 does not apply since those cases related to assessment years when Explanation 3 to section 147 was not on the statute, we find has not merit since in the above mentioned decisions the Court has interpreted the provision of section 147 on first principle to hold that only if addition are made on account of income which the AO had reason to believe had escaped assessment that any other addition can be made. It is not Explanation 3 which had been interpreted in favour of the assessee in these cases. In fact we find that Explanation 3 empowers AO’s to make assessment on any matter which comes to their notice during assessment proceedings. But the same alongwith section 147 has been interpreted as stated above. Therefore, the presence or absence of Explanation 3 to section 147 does not nullify the interpretation given by the courts in the above stated judgments

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DATE: October 31, 2014 (Date of pronouncement)
DATE: November 19, 2014 (Date of publication)
AY: 2005-06
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CITATION:
Disallowance u/s 184(5) of interest, salary etc paid by a firm to partners cannot be made if the Best Judgement assessment u/s 144 is due to incompleteness of accounts & not due to failures referred to in s. 144

The Tribunal had to consider whether disallowances for payments in respect of remuneration and interest on capital paid to the partners, in computation of taxable income of the firm, can be made under section 184(5) when even though assessment is …

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