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DATE: August 20, 2019 (Date of pronouncement)
DATE: September 6, 2019 (Date of publication)
AY: 2003-04
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CITATION:
S. 254(2): (i) Delay of 420 days in filing appeal due to subsequent decision of the Supreme Court is a valid ground for condonation of delay (ii) An order can be said to suffer from a "mistake apparent from the record" if it contrary to a subsequent judgement of the Supreme Court. Courts do not make any new law; they only clarify the legal position which was earlier not correctly understood. Such legal position clarified by Courts has retrospective effect as the law was always the same

It is also well – settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a ‘new rule’ but to maintain and expound the ‘old one’. In other words, the Judges do not make law; they only discover or find the correct law.The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make a new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite sometime, the decision rendered later on would have retrospective effect, clarifying the legal position which was earlier not correctly understood

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DATE: April 10, 2019 (Date of pronouncement)
DATE: September 6, 2019 (Date of publication)
AY: 2007-08
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CITATION:
Bogus purchases in s. 153D search assessment: There is serious suspicion about the conduct of the assessee in taking additional ground challenging the issue of approval u/s 153D for the first time before the Tribunal. The assessee is making an attempt is derail the issue on merits and to escape on technical ground. The affidavits filed by the AOs coupled with circumstantial evidences available in the assessment folders clearly establish the fact of obtaining necessary approval u/s 153D though copy of approval letter is not available in the assessment record. Argument that only profit can be assessed is not correct. 100% addition u/s 69C towards bogus purchases confirmed (NK Proteins 292 CTR 354 (SC) followed)

When assessee goes to question the administrative procedure, rather contending its case on merits, that too, after a lapse of 4 to 5 years, then obviously, a doubt arises about intend of the assessee in taking this ground and such an attempt is derail the issue on merits and to escape on technical ground. Therefore, we are of the considered view that there is no merit in the additional ground taken by the assessee challenging validity of assessment order passed by the AO u/s 143(3) r.w.s. 153A of the Income-tax Act, 1961.

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DATE: May 13, 2019 (Date of pronouncement)
DATE: August 3, 2019 (Date of publication)
AY: 2010-11
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CITATION:
Suppression of profit/ fictitious loss in stocks/ derivatives by way of Client Code Modification (CCM): CCM within 1% is absolutely normal. By no stretch of imagination can any AO consider a transaction on the Stock Exchange as income of a person other than the one who has either actually received monies in his bank account (in case of profit) and/or paid any monies from his bank account (in case of losses). The AO has to show that the losses were purchased and the party was given cheque or cash payment in view of such favours

The broker, through whom the assessee carried on share transactions, were also not imposed any penalty. No co-relation between the assessee on the one hand and the other parties on the other hand has been brought on record to co-relate that the parties to whom the alleged profits or loss is supposed to have been diverted to reduce the taxable income of the assessee, has been brought on record to show that there was any collusion with each other and were known to each, so that one party diverted its profit or loss to the other parties. Even nothing has been brought on record to suggest that the said losses were purchased and the party were given cheque or cash payment in view of such favour

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DATE: May 29, 2019 (Date of pronouncement)
DATE: July 6, 2019 (Date of publication)
AY: 2012-13
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CITATION:
Capital vs. Revenue Receipt: Damages received for breach of development agreement are capital in nature & not chargeable to tax. The only right that accrues to the assessee who complains of breach is right to file a suit for recovery of damages from the defaulting party. A breach of contract does not give rise to any debt. A right to recover damages is not assignable because it is not a chose-in-action. Such a mere 'right to sue' is neither a capital asset u/s 2(14) nor is it capable of being transferred & is therefore not chargeable under u/s 45 of the Act (All imp judgements referred)

Despite the definition of the expression capital asset in the widest possible terms in section 2(14), a right to a capital asset must fall within the expression ‘property of any kind’ and must not fall within the exceptions. Section 6 of the Transfer of Property Act which uses the expression ‘property of any kind’ in the context of transferability makes an exception in the case of mere right to sue. The decisions there under make it abundantly clear that the right to sue for damages is not an actionable claim. It cannot be assigned and its transfer is opposed to public policy. As such it will not be quite correct to say that such a right constituted capital asset which in turn has to be an interest in ‘property of any kind.’

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DATE: April 25, 2019 (Date of pronouncement)
DATE: June 27, 2019 (Date of publication)
AY: 2003-04
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CITATION:
S. 92C/ Rule 10B: If the TPO is not satisfied with the assessee's method of benchmarking royalty payments, he should independently benchmark the ALP by adopting any one of the prescribed methods. He cannot determine The ALP at nil on an ad-hoc basis. TNMM is the most appropriate method for determining the ALP of royalty and not the CUP method. If an authority like the RBI or Commerce Ministry has approved the rate of royalty, it carries persuasive value that the rate is at ALP

The Transfer Pricing Officer has not proceeded to benchmark the payment of royalty by applying any of the prescribed methods provided under the statute. Without assigning any reason, the Transfer Pricing Officer has determined the arm’s length price of the royalty payment at nil. Prima-facie, it appears, the determination of arm’s length price of royalty payment at nil by the Transfer Pricing Officer is completely on ad-hoc basis without following the due process of law as provided under the statute

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DATE: June 18, 2019 (Date of pronouncement)
DATE: June 19, 2019 (Date of publication)
AY: 2010-11
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CITATION:
Bogus F&O Loss: Unusual & sudden spurt in client code modifications undertaken by brokers was with an intention to evade taxes. In large number of client code modifications, there are no similarity between wrong code and correct code and secondly there are repetitive client code modifications. Thus, client code modifications are tainted with collusive action and manipulations & shall go out of the protection granted by the circulars of NSE/SEBI (Rakesh Gupta 405 ITR 213 (P&H) & Ninja Securities followed)

It came to notice of the Revenue that in FY 2009-10 many brokers had misused this facility of client code modifications to artificially create profits/losses which were passed on various clients/ beneficiaries with a view to defraud revenue. These brokers also benefitted by charging commission incomes for arranging these fictitious losses/profits for clients/beneficiaries. This also led to invocation of provisions of Section 131(1A) of the 1961 Act by Revenue against these brokers wherein these brokers admitted to be engaged in manipulations vide client code modifications in trade entered through stock exchanges wherein fictitious losses/profits were created which were passed on clients/beneficiaries to defraud Revenue. These brokers surrendered income by way of brokerage income earned by them on these fictitious profits/losses passed on to various clients/beneficiaries

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DATE: May 16, 2019 (Date of pronouncement)
DATE: June 19, 2019 (Date of publication)
AY: 2009-10
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CITATION:
Bogus Purchases: The CIT(A) is not justified in enhancing the assessment to disallow 100% of the bogus purchases. The only addition which can be made is to account for profit element embedded in the purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases (PCIT vs. Mohommad Haji Adam (Bom HC) followed

The assessee was in possession of primary purchase documents and the payments to the suppliers was through banking channels. The assessee had established corresponding sales before Ld. AO. The books of accounts were audited wherein quantitative details of stock was provided. We are of the considered opinion that there could be no sale without actual purchase of material keeping in view the fact that the assessee was engaged in trading activities. At the same time, the assessee failed to produce even a single supplier to confirm the purchase transactions. The delivery of material could not be substantiated.

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DATE: May 10, 2019 (Date of pronouncement)
DATE: June 8, 2019 (Date of publication)
AY: 2016-17
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CITATION:
S. 9(1)(vi) Royalty: Payment for 'bandwith services' is not assessable as 'royalty' if the assessee only has access to services and not to any equipment. The assessee also did not have any access to any process which helped in providing of such bandwith services. All infrastructure & process required for provision of bandwith services was always used and under the control of the service provider and was never given either to the assessee or to any other person availing the said services

The assessee pursuant to the terms of the “agreement‟ had only received standard facilities i.e bandwith services from RJIPL. In fact, as observed by the CIT(A), the assessee only had an access to services and did not have any access to any equipment deployed by RJIPL for providing the bandwith services. Apart there from, the assessee also did not have any access to any process which helped in providing of such bandwith services by RJIPL. As a matter of fact, all infrastructure and process required for provision of bandwith services was always used and under the control of RJIPL, and the same was never given either to the assessee or to any other person availing the said services

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DATE: April 3, 2019 (Date of pronouncement)
DATE: April 3, 2019 (Date of publication)
AY: 2006-07, 2007-08
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CITATION:
S. 45(4): The revaluation of asset being land held by the partnership firm which results into enhancement of value of asset and this enhanced amount credited in capital account of partners and when a retiring partner takes amount in his capital account including enhanced value of asset, it does not give rise to Capital Gain under section 45(4) r.w. Section 2(14) of the Income-tax Act

The partnership firm continued to exist even after the retirement of Smt. Hemlata Shetty and Shri Sudhakar Shetty from the partnership. There was only a reconstitution of partnership firm on their retirement without there being any dissolution and the land properly acquired by the partnership firm continued to be owned by the said firm even after reconstitution without any extinguishment of rights in favour of the retiring partners. The retiring partners did not acquire any right in the said property and what they got on retirement was only the money equivalent to their share of revaluation surplus (enhanced portion of the asset revalued) which was credited to their capital accounts. There was thus no transfer of capital asset by way of distribution of capital asset either on dissolution or otherwise within the meaning of section 45(4) read with section 2(14) of the Act.

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DATE: March 8, 2019 (Date of pronouncement)
DATE: March 16, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 50C Capital Gains: The adoption of stamp valuation as the sale consideration is not justified in absence of any evidence that the sale consideration was more than the value shown in the agreement. The AO has not brought on record that the property under sale was not was under various encumbrances and the assessee was having the absolute marketable title of the said property (All judgements considered)

The value adopted for the purpose of payment of stamp duty is not disputed by the assessee. The assessing officer has not brought on record that the property under sale was not was under various encumbrances and the assessee was having the absolute marketable title of the said property. No material is brought on record by assessing officer that the assessee has received much more consideration than shown in the MOI. The assessing officer treated the stamp valuation rate as the value of consideration, despite the facts that the assessee throughout the proceedings contended that the assessee was neither having possessing of the impugned piece of land nor having marketable title. The assessee offered the said piece of land on the basis ‘as is where is’. These vital facts were ignored by the lower authorities

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