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DATE: May 16, 2018 (Date of pronouncement)
DATE: July 3, 2018 (Date of publication)
AY: 2007-08
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CITATION:
S. 2(42C)/ 50B: A transaction by which an undertaking is transferred in consideration of the allottment of shares is an "exchange" and not a "sale". The fact that the agreement refers to the parties as "seller" and "purchaser" is irrelevant. S. 2(42C)/ 50B apply only to "sale" and not to "exchange". Entire law on "estoppel" explained. As there is no estoppel against a statute, an assessee is entitled to raise the claim regarding non-taxability at any stage of the proceedings

In the present case the consideration was not money but equity shares and debentures and hence the transaction was not a “Sale” but an “Exchange” and consequently, the provisions of Section 50B of the I.T. Act, are not attracted. In the case of CIT vs. Bharat Bijlee Ltd. (365 ITR 258) where an undertaking was transferred under a Scheme of Arrangement to a company which allotted preference shares and bonds as consideration to the Transferor company. Following the decision of the Hon’ble Supreme Court in Motor & General Stores (P) Ltd. (66 ITR 692), the jurisdictional High Court held that the provisions of section 50B were inapplicable to the transaction

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DATE: June 1, 2018 (Date of pronouncement)
DATE: June 2, 2018 (Date of publication)
AY: 2011-12
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S. 2(47)/ 45: Argument that the allotment of shares by the assessee's holding co to foreign investors at huge valuation results in a "transfer"/ "indirect transfer" of the assessee's assets to the foreign investors is not correct. Argument that a multi layered holding structure was deliberately created to avoid taxes in India and to conceal the information about the ultimate beneficiaries is also not correct

The AO had held that a multi layered holding structure was deliberately created to avoid taxes in India and to conceal the information about the ultimate beneficiaries. Having AE.s outside India in itself cannot be held against an assessee. Because of advancement of technology, the globe has become a villge. So, the nature of business has changed a lot. In our humble opinion, assessees are free to decide the manner in which they want to run their businesses.It is said that a citizen is perfectly entitled to exercise his ingenuity so to arrange his affairs as may make it possible for him legally and lawfully not to pay tax, and if his ingenuity succeeds, however reluctant the Court may be to acknowledge the cleverness of the assessee,the Court must give effect to the letter of the taxation law rather than strain that letter against 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: 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: September 20, 2017 (Date of pronouncement)
DATE: September 27, 2017 (Date of publication)
AY: 2010-11, 2011-12
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S. 69C Bogus purchases: If the AO has not rejected the books of accounts and has only doubted the genuineness of the suppliers but not the genuineness of the purchases and if the payments are made by account payee cheques, s. 69C is not attracted. S. 69C cannot be applied where all purchase and sales transactions are part of regular books of accounts. The basic precondition for invoking s. 69C is that the expenditure incurred by the assessee should be out of books of accounts

The AO or the FAA have not rejected the books of accounts of the assessee nor have doubted the purchases made by it. The recognised principles of accountancy and tax jurisprudence hold that no sales can take place without purchases. Thus, the case under appeal is not about non genuineness of purchases itself, but it is about non genuineness of suppliers. Whether provisions of section 69C of the Act can be applied in the matters where all the purchase and sales transactions part of regular books of accounts. Basic precondition for invoking the section 69C is that the expenditure incurred by the assessee should be out of books of accounts. Here, the payments to the suppliers, as stated earlier, have been made by cheques. So, it cannot be held that expenses were incurred by the assessee outside the books of accounts. Section 69C was introduced in to the statute with a specific purpose

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DATE: January 25, 2017 (Date of pronouncement)
DATE: July 24, 2017 (Date of publication)
AY: 2010-11
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S. 50C: The AO is not entitled to make an addition to the sale consideration declared by the assessee if the difference between the valuation adopted by the Stamp Valuation Authority and that declared by the assessee is less than 10%

In Honest Group of Hotels (P) Ltd. Vs. CIT (2002) 177 CTR (J&K) 232 it was held that when the margin between the value as given by the assessee and the Departmental valuer was less than 10 per cent, the difference is liable to be ignored and the addition made by the AO cannot be sustained. Since in the instant case such difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference is bound to occur, we are of the considered opinion that the AO in the instant case is not justified in substituting the sale consideration

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DATE: April 21, 2017 (Date of pronouncement)
DATE: May 30, 2017 (Date of publication)
AY: 2007-08
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S. 68 Bogus share capital: Entire law on the onus of the assessee and the department with regard to the genuineness of the share capital explained in the light of several judgements . Law on effect of not giving cross-examination to the assessee also explained

The assessee duly furnished the proof of identity like PAN, bank account details from the bank, other relevant material, genuineness of the transaction, payment through banking channel and even the source of source, therefore, the assessee has proved the conditions laid down u/s 68 of the Act. It is also noted that in spite of repeated request, the Ld. Assessing Officer did not provide opportunity to cross examine the concerned persons and even the relevant information and allegation, if any, made therein, which has been used against the assessee, was not provided to the assessee. At this stage, we add here that mere information is not enough rather it has to be substantiated with facts. The information may and may not be correct. For fastening the liability upon anybody, the Department has to provide the authenticity of the information to the person against whom such information is used. The principle of natural justice, demands that without confronting the assessee of such evidence, if any, or the information, no addition can be made. Even otherwise, as per Article-265 of the Constitution of India, only legitimate taxes has to be levied and collected

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DATE: April 19, 2017 (Date of pronouncement)
DATE: May 19, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 56(2)(vi): A HUF is a "group of relatives". Consequently, a gift received from a HUF by a member of the HUF is exempt from tax as provided in the Explanation to s. 56(2)(vi)

From a plain reading of section 56(2)(vi) along with the Explanation to that section and on understanding the intention of the legislature from the section, we find that a gift received from “relative”, irrespective of whether it is from an individual relative or from a group of relatives is exempt from tax under the provisions of section 56(2)(vi) of the Act as a group of relatives also falls within the Explanation to section 56(2)(vi) of the Act. It is not expressly defined in the Explanation that the word “relative” represents a single person. And it is not always necessary that singular remains singular. Sometimes a singular can mean more than one, as in the case before us. In the case before us the assessee received gift from his HUF. The word “Hindu Undivided Family”, though sounds singular unit in its form and assessed as such for income-tax purposes, finally at the end a “Hindu Undivided Family” is made up of ‘a group of relatives”

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DATE: April 13, 2017 (Date of pronouncement)
DATE: May 19, 2017 (Date of publication)
AY: 2013-14
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CITATION:
S. 68 cash credit: If the assessee has explained the source of the loans received by it, the fact that the lender may have raised bogus share capital to advance the funds to the assessee does not mean that the loan received by the assessee can be treated as unexplained income. A statement recorded under duress, which is retracted later, cannot be the sole basis for addition

If the Ld. Assessing Officer was apprehensive about the genuineness of the amount, he was duty bound to examine in the hands of the M/s Encee Securities Pvt. Ltd. or its share holders. At least, the money was germinated from the hands of the share holders, who contributed to M/s Encee Securities Pvt. Ltd. but in the hands of the present assessee, it is merely a loan and this fact has not been denied by any of the party. Even till this date, M/s Encee Securities Pvt. Ltd. has never denied that loan was given to the present assessee, therefore, the assessee is not expected to prove the source of source

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DATE: March 8, 2017 (Date of pronouncement)
DATE: March 30, 2017 (Date of publication)
AY: 2005-06
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S. 68 bogus gains from penny stocks: If the AO relies upon the statement of a third party to make the addition, he is duty bound to provide a copy of the statement to the assessee and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the D-mat account, etc cannot be treated as a bogus transaction so as to attract s. 68

It is also very strange that the FAA, being a judicial authority, has held that non providing opportunity of cross examination would not vitiate the assessment proceedings. If the AO/assessee wants to rely upon the statements of someone it is their duty to prove the truthfulness of such statements. Filing of affidavits/cross examination of the person making assertion can be means of verifying the genuineness of the statements. There can be other means also. But, the basic principles remain the same-person relying upon statement of someone has to prove it and especially when it is challenged by another party

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