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DATE: May 11, 2018 (Date of pronouncement)
DATE: May 15, 2018 (Date of publication)
AY: 2007-08
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S. 254(2) r.w Rule 34(5): Excessive delay by the Tribunal in passing judgement shakes the confidence of the litigants. Under Rule 34(5) of the Tribunal Rules read with Shivsagar Veg. Restaurant 317 ITR 433 (Bom) & Otters Club (Bom), orders have to be passed invariably within three months of the completion of hearing of the case. The delay is incurable. Even administrative clearance cannot cure the delay. Such decisions rendered after 3 months reflect a mistake apparant from the record and have to be recalled and the appeals heard afresh

Nevertheless, we think that an unreasonable delay between hearing of arguments and delivery of a judgment, unless explained by exceptional or extraordinary circumstances, is highly undesirable even when written arguments are submitted. It is not unlikely that some points which the litigant considers important may have escaped notice. But, what is more important is that litigants must have complete confidence in the results of litigation. This confidence tends to be shaken if there is excessive delay between hearing of arguments and delivery of judgments. Justice, as we have often observed, must not only be done but must manifestly appear to be done.

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DATE: May 11, 2018 (Date of pronouncement)
DATE: May 15, 2018 (Date of publication)
AY: 2012-13
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S. 68 Bogus share capital: The assessee has to justify the allottment of shares to outsiders at exorbitant premium with cogent material and not bald statements. The fact that s. 56(2)(viib) r.w.s. 2(24)(xvi) comes into effect from AY 2013-14 does not mean that for earlier years the assessee is not required to justify the identity, genuineness and creditworthiness of the transaction. The burden is very high for closely held companies. Mere submission of name & address, Balance Sheet & bank statement of the subscribers is not sufficient to discharge the onus (all judgements on the point considered)

The assessee did not rely on its own financial statements, business model and financial indicators as are existing in its audited financial statements to justify charging of huge share premium of Rs. 490 per share as against face value of Rs. 10 per share from these new shareholders. The problem got further aggravated when the assessee does not bring on record project report or any other cogent material justifying issue of shares at huge premium which could reflects viability, higher profitability and bright future prospects of the assessee company by implementing project for which funds were raised at huge share premium to justify chargeability of such a huge share premium. The assessee’s claim in statement of fact/written submissions as to justification of share premium / valuation etc are not substantiated through any cogent evidences on record and are merely bald statements which cannot be relied upon in the absence of cogent material/evidences brought on record by the assessee. The assessee raised funds to the tune of Rs. 300 lacs from these new shareholders and it was for the assessee to have brought on record cogent material to substantiate its contentions and if the evidences are withheld by the assessee then it is at assessee’s own peril as presumption will be drawn against the assessee.

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DATE: October 23, 2018 (Date of pronouncement)
DATE: May 15, 2018 (Date of publication)
AY: 2011-12
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CITATION:
S. 69C Bogus Purchases (100% disallowance confirmed): The right of cross-examination is not absolute. No prejudice is caused to the assessee by non granting of cross examination if the assessee has not discharged the primary onus. The fact that purchase bills are produced and payment is made through banking channels is not sufficient if the other evidence is lacking

No prejudice is caused to the assessee by non granting of opportunity of cross examination by the authorities below as right of cross examination is not absolute as in the instant case even primary onus that fell on the assessee did not stood discharged. Had assessee discharged its primary onus, but still the authorities proceed to prejudice assessee based solely on the incriminating statements/affidavits of third parties recorded at the back of the assessee, the right of the assessee to cross examine these third parties will become absolute. It is not a case that the authorities below have merely/solely relied on the statement/affidavit of third parties namely hawala dealers recorded at the back of the assessee to cause prejudice to the assessee rather primary onus that lay on the assessee was not discharged by the assessee

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DATE: May 2, 2018 (Date of pronouncement)
DATE: May 9, 2018 (Date of publication)
AY: 2013-14
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CITATION:
S. 56(2)(viib) Fair Market Value of shares transferred: Rule 11UA allows the assessee the right to adopt the method of his choice for valuing shares (DCF, NAV etc). The AO has no jurisdiction to insist that the assessee should adopt only a particular method for determining the value of the shares. AOs should not deviate from earlier years’ decisions without assigning any concrete and justifiable reasons. Tax determination cannot be left to whims and fancies of a person. It is a serious task and has to be accomplished in a disciplined manner. If an assessee has been allowed a certain concession in earlier year/(s) it cannot be withdrawn in subsequent years without plausible reasons

Section 56 allows the assessees to adopt one of the methods of their choice. But,the AO held that the assessee should have adopted only one method for determining the value of the shares.In our opinion,it was beyond the jurisdiction of the AO to insist upon a particular system, especially the Act allows to choose one of the two methods.Until and unless the legislature amends the provision of the Act and prescribes only one method for valuation of the shares,the assessees are free to adopt any one of the methods.

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DATE: May 1, 2018 (Date of pronouncement)
DATE: May 3, 2018 (Date of publication)
AY: -
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S. 253(5) r.w.s. 252(1): The Registrar of the Tribunal has no jurisdiction to consider and decide on applications for condonation of delay. Only the Court/ Tribunal have the power. The order passed by the Registrar is ultra vires his power and non est in law. He should desist from passing such orders

The power of condoning the delay is with the Court/Tribunal under the Limitation Act as well as u/s 253(5) r.w.s. 252(1) of the Income Tax Act. The petition of assessee has to be examined by the court/Tribunal after hearing both the parties and after considering the reasons, facts etc. Hence, the order passed by the Registrar is ultra virus beyond his power. hence his order is non-est in the eyes of the law. Henceforth the Registrar should desist from passing such orders and he should put up all petitions before the Bench.

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DATE: April 13, 2018 (Date of pronouncement)
DATE: April 19, 2018 (Date of publication)
AY: 2011-12
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Bogus Purchases: The fact that the supplier admitted to issuing bogus bills does not necessarily mean that he had issued accommodation bills to the assessee. There is subtle but very important difference in issuing bogus bills and issuing accommodation bills to a particular party. The difference becomes very important when a supplier in his affidavit admits supply of goods. As far as sales are concerned there is no doubt about the genuineness of such sales. It is also a fact that suppliers were paying VAT and were filing their returns of income. In response to the notices issued by the AO u/s 133(6) of the Act, the supplier admitted the genuineness of the transaction. Accordingly, the purchases cannot be treated as bogus

We find that DJ had admitted of issuing bogus bills. But, nowhere he had admitted that he had issued accommodation bills to the assessee. In our opinion, there is subtle but very important difference in issuing bogus bills and issuing accommodation bills to a particular party. The difference becomes very important when a supplier in his affidavit admits supply of goods.In this matter, the assessee had made no local sales and goods were exported, as stated earlier. So, as far as sales are concerned there is no doubt about the genuineness of such sales. It is also a fact that suppliers were paying VAT and were filing their returns of income.In response to the notices issued by the AO,under section 133(6) of the Act, the supplier had admitted the genuineness of the transaction

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DATE: February 23, 2018 (Date of pronouncement)
DATE: April 14, 2018 (Date of publication)
AY: 2006-07
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CITATION:
S. 133A: An admission of estimated income made during survey has no evidentiary value and is not binding on the assessee. The income has to be assessed as per the return of income and books of account. Hiralal Maganlal 97 TTJ Mum 377 distinguished. CBDT Circular No. 286/2/2003 (Inv.) II dated 10.03.2003 referred

The Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. vs State of Kerala & Anr., 91 ITR 18 (SC) recognised the trite law that it was open to the assessee who made the admission to show that it was incorrect. As per the Hon’ble Supreme Court, it was imperative that in such a situation assessee ought to be given a proper opportunity to show the correct state of facts. In fact, in the case before the Hon’ble Supreme Court, assessee was attempting to show that the entries made by it in the account books did not disclose the correct state of facts. The Hon’ble Supreme Court recognised the right of the assessee to do so on the premise that it was open to the assessee who made the admission to show that the same was incorrect. In other words, as per the Hon’ble Supreme Court, the admission made on an anterior date, which was not based on correct state of facts, was not conclusive to hold the issue against the assessee

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DATE: February 28, 2018 (Date of pronouncement)
DATE: March 29, 2018 (Date of publication)
AY: 2012-13
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Family Arrangement: It is not necessary for the validity of a family arrangement that there must be existing legal claims & disputes between the family members. The possibility of future disputes is sufficient. Family settlements entered into bona fide to maintain peace and harmony in the family are valid and binding on the authorities

Though conflict of legal claims in present or in future is generally a condition for the validity of a family arrangement, it is not necessarily so. Even bona fide disputes, present or possible, which may not involve legal claims will suffice. Members of a joint Hindu family may, to maintain peace or to bring about harmony in the family, enter into such a family arrangement. If such an arrangement is entered into bona fide and the terms thereof are fair in the circumstances of a particular case, Courts will more readily give assent to such an arrangement than to avoid it

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DATE: March 9, 2018 (Date of pronouncement)
DATE: March 29, 2018 (Date of publication)
AY: 2006-07
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CITATION:
Entire law on what constitutes a "Sham transaction"/ "Colourable device" explained. The sale of shares in a pvt ltd co by the assessee to a relative (son) in order to book losses so as to set-off the capital gains from on sale of property cannot be rejected as a sham transaction / colourable device if the transaction is within the four corners of law and valid

The transactions being genuine, merely because the assessee has claimed set-off of capital loss against the capital gain earned during the same period, cannot be said to be a colourable device or method adopted by assessee to avoid the tax. The shares were transferred by executing share transfer Form and after paying the requisite Stamp duty. The company NTPL also passed a Board Resolution for transfer of those shares. The consideration of share was effected to through banking channel. The fair market value arrived by assessee, as furnished before Commissioner (Appeals). In our view the transactions of sale of share were genuine and transacted at a proper valuation. The lower authority has not disputed the genuinity of transaction. The transactions carried by assessee are valid in law, cannot be treated as non-est merely on the basis of some economic detriment or it may be prejudicial to the interest of revenue

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DATE: February 28, 2018 (Date of pronouncement)
DATE: March 26, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Bogus share capital: The fact that a pvt. ltd co issued shares at an exorbitant premium is irrelevant if the assessee has proved the genuineness of the transaction. If the assessee has furnished necessary evidence to prove the identity of the share applicants and their PAN details, the department is free to proceed to reopen the individual assessments of the share applicants but it cannot be regarded as undisclosed income of the assessee

As regards the AOs observation with regard to the issue of shares at a face value of Rs.10/- issued at a premium of Rs.990 per share, we find that there is no merit in the findings of the AO for the reason that the issue of shares at a premium and subscription to such shares is within the knowledge of the company and the subscribers to the share application money and the AO does not have any role to play as long as the assessee has proved genuineness of transactions

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