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COURT:
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DATE: November 30, 2016 (Date of pronouncement)
DATE: January 4, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 143(2)/ 143(3): Proper service of the notice u/s 143(2) is mandatory and its failure renders the assessment order void. The fact that an unauthorized person appeared on behalf of the assessee before the AO does not mean that the notice was properly served

The contention of the AR was that Shri M.Sankar is not a concerned person representing the assessee to receive such notice and the notice was served on improper person. We also find from the assessment order that Shri Sanjib Sarkar being one of the partners appeared on 10-12- 2010 before the AO for first time and the order sheet at page no-1 of paper book supports the same. We further find that the AO recorded the issuance of notice u/s. 142(1) on 19-7-2010 for fixing the hearing on 02-08-2010 and thereafter, according to assessment order, probably, after 26-08-2010 another notice for initiation of penalty proceedings u/s. 271(1)(b)of the Act was issued. Therefore, it goes to show that a person claiming to be representing the assessee as partner appeared before the AO for the first time on 10-12-2010 in response to notice issued u/s. 271(1)(b) of the Act and it concluded that the service of notice u/sec 143(2) on 30-09-09 and issuance of notice thereafter u/sec 142(1) of the Act was not in the knowledge of the assessee and as rightly contended by the AR notice u/sec 143(2) of the Act was not properly served on the assessee

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DATE: December 2, 2016 (Date of pronouncement)
DATE: December 23, 2016 (Date of publication)
AY: 2005-06
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CITATION:
Penny Stocks: The fact that the stock is thinly traded and there is unusually high gain is not sufficient to treat the long-term capital gains as bogus when all the paper work is in order. The revenue has to bring material on record to support its finding that there has been collusion / connivance between the broker and the assessee for the introduction of its unaccounted money

When purchase and sale of shares were supported by proper contract notes, deliveries of shares were received through demat accounts maintained with various agencies, the shares were purchased and sold through recognized broker and the sale considerations were received by account payee cheques, the transactions cannot be treated as bogus and the income so disclosed was assessable as LTCG. We find that in the instant case, the addition has been made only on the basis of the suspicion that the difference in purchase and sale price of these shares is unusually high. The revenue had not brought any material on record to support its finding that there has been collusion / connivance between the broker and the assessee for the introduction of its unaccounted money

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DATE: March 2, 2016 (Date of pronouncement)
DATE: March 25, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 14A/ 115JB: (i) Investments in subsidiary companies are strategic investments to whom s. 14A disallowance does not apply (ii) Receipt on forfeiture of share warrants is a capital receipt and has to be excluded from "Book Profits" even if credited to the P&L A/c

The assessee has duly disclosed the fact of forfeiture of share warrants amounting to Rs. 12,65,75,000/- in its notes on accounts vide Note No. 6 to Schedule 11 of Financial Statements for the year ended 31.3.2009. Hence following the decision of the Mumbai Tribunal in Shivalik Venture (P) Ltd vs. DCIT (2015) 173 TTJ (Mumbai) 238, the profit and loss account prepared in accordance with Part II and III of Schedule VI of Companies Act 1956, includes notes on accounts thereon and accordingly in order to determine the real profit of the assessee

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DATE: November 6, 2015 (Date of pronouncement)
DATE: December 3, 2015 (Date of publication)
AY: 2006-07
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CITATION:
S. 271(1)(c): A penalty notice u/s 274 which does not strike out the irrelevant portion & which does not specify whether the penalty is for “concealment” or for “furnishing inaccurate particulars” renders the penalty order void

The next argument that the show cause notice u/s.274 of the Act which is in a printed form does not strike out as to whether the penalty is sought to be levied on the for “furnishing inaccurate particulars of income” or “concealing particulars of such income”. On this aspect we find that in the show cause notice u/s.274 of the Act the AO has not struck out the irrelevant part. It is therefore not spelt out as to whether the penalty proceedings are sought to be levied for “furnishing inaccurate particulars of income” or “concealing particulars of such income”

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DATE: October 7, 2015 (Date of pronouncement)
DATE: November 17, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 50C should not be invoked if difference between stamp value and declared consideration is nominal, S. 14A/ Rule 8D does not apply to share application money, Pure foreign exchange hedging transactions cannot be treated as speculative transactions

Though section 50C of the Act does not speak of any such variation in terms of percentage between value adopted for the purpose of stamp duty and the registration and the actual consideration received on transfer, keeping in view of the decision of the Hon’ble ITAT, Hyderabad Bench and keeping in view of the fact that the difference between the valuation for the stamp duty and the actual consideration received by the assessee is less than 2% we are of the view that addition sustained by CIT(A) should be deleted

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DATE: October 28, 2015 (Date of pronouncement)
DATE: October 30, 2015 (Date of publication)
AY: 2001-02 to 2005-06
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CITATION:
The AO cannot treat a transaction as bogus only on the basis of suspicion or surmise. He has to bring material on record to support his finding that there has been collusion/connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by Contract Notes and demat statements and Account Payee Cheques cannot be treated as bogus

Where the payments are made by Account Payee Cheques and the existence of the brokers is not disputed the assessee cannot be punished for the default of the brokers and share transactions cannot be held to be bogus. When purchase and sale of shares were supported by proper Contract Notes, deliveries of shares were received through demat accounts maintained with various agencies, the shares were purchased and sold through recognised broker and the sale considerations were received by Account Payee Cheques, the transactions cannot be treated as bogus. Assessment cannot be made on the basis of suspicion or surmise. The AO has not brought any material on record to support his finding that there has been collusion/connivance between the broker and the appellant for the introduction of its unaccounted money

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DATE: October 14, 2015 (Date of pronouncement)
DATE: October 20, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A Rule 8D does not apply to shares held as stock-in-trade. AO cannot apply Rule 8D to make a disallowance without showing how the assessee's disallowance is wrong

The AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value

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DATE: June 30, 2015 (Date of pronouncement)
DATE: July 1, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 271AAA: Law on what is “undisclosed income” and levy of penalty on the basis of a “dumb” document and surrender by the assessee explained

A charge can be levied on the basis of document only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and/or in the search. The document should be clear and unambiguous in respect of all the four components of the charge of tax. If it is not so, the document is only a dumb document. No charge can be levied on the basis of a dumb document. A document found during the course of a search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in the relevant assessment year

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DATE: June 24, 2015 (Date of pronouncement)
DATE: June 30, 2015 (Date of publication)
AY: 2007-08 to 2009-10
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CITATION:
S. 271(1)(c): Law on levy of penalty in a case where satisfaction is recorded in s. 153C/153D assessments by AO who is common to the searched party and the assessee explained

The attempt at the end of the assessee is that there should be a straight jacket system, whereby the satisfaction recorded even by the same AO then, that should be placed in the file of searched person and if it is placed in some other cupboard in his room by the AO then, there cannot be any satisfaction, we fail to appreciate that technical approach at the end of the assessee. The law does not require the manner and the procedure of keeping the files. The section only requires that a satisfaction be recorded and it should be during the period propounded by Hon’ble S.C. in CIT vs. Calcutta Knitwears 362 ITR 673

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COURT:
CORAM:
SECTION(S):
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COUNSEL:
DATE: March 4, 2015 (Date of pronouncement)
DATE: June 19, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 40(a)(ia) second proviso is curative and retrospective. Legitimate business expenditure cannot be disallowed if the payee has paid tax thereon

The second proviso to section 40(a)(ia) of the Act inserted by the Finance Act, 2012 is curative in nature intended to supply an obvious omission, take care of an unintended consequence and make the section workable. Section 40(a)(ia) without the second proviso resulted in the unintended consequence of disallowance of legitimate business expenditure even in a case where the payee in receipt of the income had paid tax. It has for long been the legal position that if the payee has paid tax on his income, no recovery of any tax can be made from the person who had failed to deduct the income tax at source from such amount

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