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DATE: March 3, 2016 (Date of pronouncement)
DATE: March 31, 2016 (Date of publication)
AY: 2009-10
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S. 271(1)(c): No penalty leviable on bonafide human error committed while filing return of income

When the assessee was confronted with the depreciation being claimed on the property, the income from which had been returned under the head income from house property, it immediately realized its mistake of computation of total income and agreed for the addition to its total income. The mistake was inadvertent, is evident from the fact that assessee had furnished return of income of Rs. 3,27,79,273/- and, therefore, there was no reason to make a false claim of a petty sum of Rs. 7,87,734/-

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DATE: February 24, 2016 (Date of pronouncement)
DATE: March 30, 2016 (Date of publication)
AY: 2009-10
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Section 68- Cash Credit

In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further

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DATE: February 19, 2016 (Date of pronouncement)
DATE: March 28, 2016 (Date of publication)
AY: 2004-05
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Reopening u/s 147 without application of mind is not valid

In this situation it was on the AO to peruse the relevant assessment record of AY 2005-06 which forming reason to believe and thus it is safely presumed that the AO initiated reassessment proceedings u/s 147 of the Act and issued notice u/s 148 of the Act without application of mind working in a mechanical manner and thus the same are not sustainable in the facts and on law. Respectfully following the dicta laid down by jurisdictional High Court in the case of CIT vs. G & G Pharma (Supra) we are inclined to hold that the AO issued notice u/s 148 of Act on the wrong and invalid assumption of Jurisdictional and all subsequent proceedings is pursuance thereto can’t be held as sustainable and valid hence, the same deserve to be quashed and we quash the same

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DATE: March 11, 2016 (Date of pronouncement)
DATE: March 14, 2016 (Date of publication)
AY: 2008-09
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S. 9/ 44BB: Income received by a non-resident under a time charter agreement accrues and arises in india even when the vessel and crew are outside the territorial waters of India. Such income is assessable on a presumptive basis u/s 44BB

Gross payments are intricately linked to the services/works rendered by the assessee and arise due to the execution of contract in India, under the terms and conditions of the contract between the assessee and Siem Offshore Inc. The vessel was hired by the contract and it was only for this purpose that the vessel and the crew were involved in the said contract. Thus, it is improper on the part of the assessee to offer to tax its revenues only on a pro-rata basis based upon the number of days the vessel was stationed within 200 nautical miles from the Indian shore line. As the contract for the provision of crew was a continuing contract, it cannot be said that revenues were not earned for the period the vessel was out of the territorial waters of India. Hence, the entire contract amount is to be considered for the purpose of calculating the gross receipts and all receipts received against the execution of the contract would come under the purview of gross receipts. Thus, gross amounts for the months of November 2007, December 2007 and January 2008 are to be included in the gross receipts

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DATE: February 11, 2016 (Date of pronouncement)
DATE: February 17, 2016 (Date of publication)
AY: 2011-12
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A Power of Attorney executed by the Head Office in favour of the Liaison Office in India does not create a Permanent Establishment if the powers are specific to the liaison office and are not unfettered powers to enable to Liaison Office to act on behalf of the enterprise

The sole basis on which the AO as well as the DRP came to a conclusion that the assessee had a P.E. in India is the clauses in power of attorney executed by the head office in favour of its employee in the L.O. in India. Reliance was also placed on the permission granted by the RBI to the assessee for setting up the L.O. A plain reading of the clauses in the power of attorney takes us to a conclusion that the powers given therein are L.O. specific. The AO’s conclusion that the power of attorney granted unfettered powers to its L.O. employee, to do all or any acts for and on behalf of the assessee, is incorrect. In our view the finding of the AO that the power of attorney is an open ended document, which is clearly outside the scope of initial permission granted by the RBI is also perverse. No doubt the AO can investigate, call for evidences and come to a conclusion where any income earning activity has been carried out by the L.O. so as to construe it as fixed P.E. but, in our view it is beyond the jurisdiction of the AO to adjudicate and conclude that the assessee has filed false declarations before the RBI. At best, he can bring his findings to the notice of the RBI which may consider the same in accordance with law. The RBI has not found any violation of conditions laid down by it while permitting the assessee to have an L.O. In such circumstances, no adverse inference can be drawn

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DATE: February 11, 2016 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2008-09
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Argument that transfer pricing adjustment cannot be made if the assessee's income is deductible u/s 10A/ 10B is not acceptable. Contrary view in TCS cannot be followed as it is obiter dicta & contrary to law laid down in Aztech Software 107 ITD 141 (SB)

No exception has been carved out by the statute for non-determination of the ALP of an international transaction of an assessee who is eligible for the benefit of deduction section 10A/10B or any other section of Chapter- VIA of the Act. Section 92(1) clearly provides that any income arising from an international transaction is required to be computed having regard to its arm’s length price. There is no provision exempting the computation of total income arising from an international transaction having regard to its ALP, in the case of an assessee entitled to deduction u/s 10A or 10B or any other relevant provision. Section 92C dealing with computation of ALP clearly provides that the ALP in relation to an international transaction shall be determined by one of the methods given in this provision. This section also does not immune an international transaction from the computation of its ALP when income is otherwise eligible for deduction. On the contrary, we find that sub-section (4) of section 92C plainly stipulates that where an ALP is determined, the AO may compute the total income of the assessee having regard to the ALP so determined. This shows that the total income of an assessee entering into an international transaction, is required to be necessarily computed having regard to its ALP without any exception

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DATE: December 18, 2015 (Date of pronouncement)
DATE: December 26, 2015 (Date of publication)
AY: 2007-08
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S. 10A: Even undisclosed income surrendered by assessee is eligible for s. 10A exemption if dept does not show that the assessee has any other source

The decision of the Hon’ble Madras High Court in the case of CIT Vs S. Khader Khan Son (2008) 300 ITR 157 is of no help to the assessee because the assessee agreed during the course of survey for the addition only when discrepancies in the loose papers were found. The assessee surrendered Rs.11 lakhs to cover up the irregularities of the business and short coming found during the course of survey. The said surrender was related to the regular business of the assessee and it is not brought on record that the assessee earned the said income from any other source. Therefore, the deduction u/s 10A of the Act was allowable to the assessee being 100% Export Oriented Unit established in SEZ on this income also. In view of the above we uphold the addition made by the AO and sustained by the CIT(A), however, the AO is directed to allow the deduction u/s 10A of the Act

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DATE: September 1, 2015 (Date of pronouncement)
DATE: November 26, 2015 (Date of publication)
AY: 2009-10
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S. 14A/ Rule 8D: The AO must give reasons before rejecting the assessee's claim. He must establish nexus between the expenditure & the exempt income. The disallowance cannot exceed the exempt income

The AO has neither recorded his satisfaction nor given reasons as to how the claim of expenditure in relation to tax free income has not been correctly made by the assessee as envisaged under section 14A(2). The AO has mechanically invoked Rule 8D. The AO has not established any nexus between the investments made and the expenditure incurred under the head interest expenditure and administrative expenses, before disregarding the disallowance suo moto made by the assessee. disallowance u/s.14A cannot exceed the amount of exempt income

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DATE: October 21, 2015 (Date of pronouncement)
DATE: November 20, 2015 (Date of publication)
AY: 2008-09
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S. 271B: The requirement in s. 44AB that the the tax audit report has to be obtained "before" the specified date has to be interpreted to mean "on or before" the specified date. So, even if the audit report is obtained "on" the specified date, there is no default

The term “before” specified date in section 44AB means “on or before” the specified date. Therefore, though audit report is signed on 30th September 2008 and the requirement of law is to be construed as tax audit report required to be obtained on or before 30th September 2008. Hence, the assessee has obtained tax audit report in time and there is no default u/s 271B. In Prem Chand Nathmal Kothari vs. Kishanlal Bachharaj Vyas & Ors dated 5th April 1975 reported in AIR 1976 Bombay 82 the Bombay High Court, relying on the Chambers Dictionary, held that word ‘before’ means ‘previous to the expiration of’. Therefore, before 30th September, 2008 means before the end of 30th September 2008

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DATE: October 28, 2015 (Date of pronouncement)
DATE: November 20, 2015 (Date of publication)
AY: 2006-07
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S. 147: Reopening solely on the basis of information received from another AO that the assessee has booked bogus bills but without independent application of mind to the information renders the reopening void

At the time of recording of the reasons the Assessing Officer apparently was not having any idea about the nature of the transactions entered into by the assessee. In the reasons recorded there is no mention about the nature of the transactions. As per provision of section 147 the reasons to believe has to be that of the Assessing Officer and further there have to be application of mind by the Assessing Officer. The Assessing Officer was also not aware of the nature of the accommodation entries. In the reasons recorded he has simply mentioned the names of the party and the amount and nowhere has stated the nature of such entry. This also shows that the Assessing Officer has made no effort to look into the return of the assessee which was available with him