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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: October 15, 2015 (Date of pronouncement)
DATE: October 19, 2015 (Date of publication)
AY: 1995-96
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CITATION:
S. 32: Even prior to the insertion of "intangible assets" in s. 32, intellectual property rights such as trademarks, copyrights and know-how constitute "plant" for purposes of depreciation. The department is not entitled to rewrite the terms of a commercial agreement

The question is, would intellectual property such as trademarks, copyrights and know-how come within the definition of ‘plant’ in the ‘sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it’? In our opinion, this must be answered in the affirmative for the reason that there can be no doubt that for the purposes of a large business, control over intellectual property rights such as brand name, trademark etc. are absolutely necessary. Moreover, the acquisition of such rights and know-how is acquisition of a capital nature, more particularly in the case of the Assessee. Therefore, it cannot be doubted that so far as the Assessee is concerned, the trademarks, copyrights and know-how acquired by it would come within the definition of ‘plant’ being commercially necessary and essential as understood by those dealing with direct taxes

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DATE: October 8, 2015 (Date of pronouncement)
DATE: October 19, 2015 (Date of publication)
AY: 2003-04
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CITATION:
S. 147: Reopening only on the basis of information received that the assessee has introduced unaccounted money in the form of accommodation entries without showing in what manner the AO applied independent mind to the information renders the reopening void

Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: “it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries”. In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case

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DATE: October 9, 2015 (Date of pronouncement)
DATE: October 19, 2015 (Date of publication)
AY: 1991-92, 1992-93
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CITATION:
S. 263: Claim that notional interest on funds placed by the s. 10A eligible unit with the H.O. is allowable as a deduction to the H.O. and is exempt in the hands of the s. 10A unit is an “unsustainable view” justifying revision action

The Assessee has not derived any interest income. Therefore, reducing such notional income – which has neither been accrued nor received – from the Assessee’s total income is completely alien to the scheme of the Act. Such notional interest could never form a part of the Assessee’s income and thus the Assessee’s claim that the same is to be excluded under Section 10A of the Act is flawed and wholly unsustainable in law. The view as canvassed on behalf of the Assessee is not, even remotely, plausible

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DATE: September 16, 2015 (Date of pronouncement)
DATE: October 13, 2015 (Date of publication)
AY: 2008-09
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S. 148: If Dept behaves in an irresponsible manner and does not furnish the record reasons on the basis that the assessee was already aware of them, the assessment has to be quashed

In issues such as this, i.e. where jurisdictional issue is involved the same must be strictly complied with by the authority concerned and no question of knowledge being attributed on the basis of implication can arise. We also do not appreciate the stand of the revenue, that the respondent-assessee had asked for reasons recorded only once and therefore seeking to justify non-furnishing of reasons. We expect the state to act more responsibly

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DATE: August 28, 2015 (Date of pronouncement)
DATE: October 13, 2015 (Date of publication)
AY: -
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CITATION:
Dept directed to follow directions of Delhi High Court in 352 ITR 273 and to be vigilant and ensure that such mistakes do not occur. Dept directed to set up a self-auditing vigilance cell to redress taxpayers' grievances

The Income Tax authorities shall follow the directions given by the Delhi High Court in case of Court On Its Own Motion v. Commissioner of Income-tax 352 ITR 273 in other cities, including the city of Mumbai, in Maharashtra State. We hope and trust that the Income Tax Department will be more vigilant and ensure that such mistakes will not occur in future. We also direct the Income Tax Department to form a Vigilance Cell to ensure that there is a monitoring authority, which would monitor various policy decisions which are taken and a self auditing mechanism is required to be formulated to ensure that the income tax assessees are not made to run from pillar to post for the purpose of redressal of their grievances

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DATE: September 22, 2015 (Date of pronouncement)
DATE: October 13, 2015 (Date of publication)
AY: 2006-07
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S. 147: Entire law on whether reopening of assessment in the absence of "fresh tangible material" is permissible reviewed

Availability of fresh tangible material in the possession of AO at the time of recording of impugned reasons is a sine qua none, before the AO can record reasons for reopening of the case. We begin with the judgment of Hon’ble Supreme Court in the case of CIT vs. Kelvinator India Ltd. 320 ITR 561 (SC), laying down that for reopening of the assessment, the AO should have in its possession ‘tangible material’. The term ‘tangible material’ has been understood and explained by various courts subsequently. There has been unanimity of the courts on this issue that in absence of fresh material indicating escaped income, the AO cannot assume jurisdiction to reopen already concluded assessment.

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DATE: January 19, 2015 (Date of pronouncement)
DATE: October 12, 2015 (Date of publication)
AY: -
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For filing frivolous appeals and harassing taxpayers, heavy/exemplary costs to be imposed which will have to be personally paid by the jurisdictional CIT who sanctioned filing of the appeal

We are now putting the Officers of the Revenue to notice, that in all cases including where appeals are filed, the Offices instructing the Counsel would review whether the appeal should at all be pressed in view of the Revenue having accepted the jurisdictional High Court’s order on an identical issue and take necessary instructions from the Commissioner of Income Tax to withdraw and/or not press the appeal. Alternatively, in case a conscious decision is taken to press the appeal, then an averment to the effect that either the case is distinguishable or an appeal has been preferred from the decision of this Court to the Apex Court if not averred in the appeal memo, then a further affidavit in support be filed indicating the reasons. In the absence of the above, we will be compelled to impose heavy/exemplary costs to be personally personally paid by the jurisdictional – Commissioner of Income Tax under whose jurisdiction, the appeal is being filed and pressed in spite of the issue being settled by this Court and the same having been accepted by the Revenue

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DATE: September 11, 2015 (Date of pronouncement)
DATE: October 12, 2015 (Date of publication)
AY: 2002-03 to 2008-09
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CITATION:
Extrapolation: Fact that assessee admitted undisclosed income for one year does not mean that AO can assume that similar undisclosed income is earned in earlier years as well

The assessing officer did not bring any material on record to support his case of estimation of professional receipts of earlier years. We also notice that the assessing offer has assessed the net profit on the alleged suppressed professional receipts, meaning thereby, the assessing officer has presumed that the assessee would have suppressed corresponding expenses also. Again it is only a guess work only, unsupported by any material. Similarly, the average daily collection estimated by the AO was also mere guess work. In effect, there is no material available with the AO to show that the assessee has suppressed professional receipts as well as expenses in order to substantiate the estimation made by him

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DATE: September 11, 2015 (Date of pronouncement)
DATE: October 12, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 271(1)(c): If the notice does not clearly specify whether the penalty is initiated for "concealment" or for "filing inaccurate particulars", it is invalid. Penalty should not be imposed merely because the income has been offered to tax in a later year and not in the present year

The penalty notice issued u/s 274 of the Act is ambiguous to the extent for which the penalties are initiated. The said notice does not specify where the present penalty is being levied for concealment of income or for furnishing of inaccurate particulars of income. CIT (A) did not strike of The irrelevant limb mentioned in the notice u/s 274 of the Act. CIT (A) is not clear as to the relevant limb of the provisions of section 271(1)(c) of the Act for which penalty should be levied. Further, in the quantum order u/s 250 of the Act, the CIT (A) initiated penalty for assessee’s failure in furnishing inaccurate particulars in respect of estimated cost of future expenditure resulted in suppression of income. In the penalty order of the CIT (A), penalty was levied for “concealment of particulars of income‟ in respect of the change in estimated cost. By all these variations, the CIT (A) is not clear as to whether the penalties are levied for “concealment of income” or “furnishing of inaccurate particulars of income”

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