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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: January 19, 2018 (Date of pronouncement)
DATE: January 23, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 271(1)(c) penalty: If the AO has not recorded any satisfaction in absolute terms whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income, the levy of penalty is invalid. The judgement of the Bombay High Court in Maharaj Garage cannot be read out of context or in a manner to mean that there is no need for mentioning the specific limb of section 271(1)(c) of the Act for which the penalty was intended to be imposed, as such issue never came up for consideration before the High Court

As far as the judgment of the Hon’ble Jurisdictional High Court in Maharaj Garage dated 22nd August 2017 in ITA no. 21 of 2008 relied upon by the learned Departmental Representative, on a careful reading of the said judgment, we are of the view that it will have no application to the facts of the case. As could be seen, the basic issue arising out of the reference application which fell for consideration of the Hon’ble Jurisdictional High Court was, while granting previous approval by Inspecting Assistant Commissioner of Income–tax as per provisions of section 271(1)(c)(iii) of the Act whether the assessee was required to be given an opportunity of being heard. While considering this issue, the Hon’ble Jurisdictional High Court observed that provisions of section 271(1)(c)(iii) does not attract rule of presumption of mens rea as the penalty imposable under the said provision is for the breach of civil obligation. The observations of the Hon’ble Court against issuance of show cause notice appears to be in the context of quantum of penalty proposed to be imposed and not with reference to the doing away with the issuance of show cause notice as contemplated under section 274 of the Act. Therefore, the judgment of the Hon’ble Court cannot be read out of context or in a manner to mean that there is no need for mentioning the specific limb of section 271(1)(c) of the Act for which the penalty was intended to be imposed, as such issue never came up for consideration before the Hon’ble High Court. That being the case, the aforesaid decision cannot be applied for rebutting the proposition that in the absence of recording of satisfaction regarding the exact nature of offence, no penalty under section 271(1)(c) can be imposed

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DATE: December 18, 2017 (Date of pronouncement)
DATE: December 22, 2017 (Date of publication)
AY: 2013-14
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CITATION:
S. 54: Acquisition of new flat in an apartment under construction should be considered as a case of “Construction” and not “Purchase”. The date of commencement of construction is not relevant for purpose of s. 54. The fact that the construction may have commenced prior to the date of transfer of the old asset is irrelevant. If the construction is completed within 3 years from the date of transfer, the exemption is available

For the purpose of sec. 54 of the Act, we have to see whether the assessee has completed the construction within three years from the date of transfer of old asset. In the instant case, there is no dispute that the assessee took possession of the new flat within three years from the date of sale of old residential flat. Accordingly, we are of the view that the assessee has complied with the time limit prescribed u/s 54 of the Act. Since the amount invested in the new flat prior to the due date for furnishing return of income was more than the amount of capital gain, the requirements of depositing any money under capital gains account scheme does not arise in the instant case. Further, the Hon’ble High Court has held in the case of ITO Vs. K.C.Gopalan (2000)(162 CTR 0566) that there is no requirement that the sale proceeds realised on sale of old residential house alone should be utilised

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DATE: November 1, 2017 (Date of pronouncement)
DATE: November 28, 2017 (Date of publication)
AY: 2010-11
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S. 45/ 48: The scheme of the Act is to assess real income and not hypothetical income. The word "accrue" in "full value of consideration received or accruing" in s. 45 means that the assessee has a legally enforceable right to receive the sum. An amount which is payable only on fulfillment of conditions does not create an enforceable right and has to be excluded while computing capital gains

The expression “full value of consideration received or accruing” would mean the amount actually received by the assessee or consideration which has accrued to the assessee. The expression “accrue” means a right acquired by the assessee to receive income. Unless, a debt due by somebody has been created in favour of assessee, it cannot be said that he has acquired a right to receive the income or that income has accrued to him. An amount can accrue to assessee if he acquires a legally enforceable right to receive it from the debtor. The entire purpose of the Income Tax Act, 1961 is to assess the real income of the assessee. Therefore, the Departmental Authorities cannot assess any hypothetical or notional income to tax

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DATE: October 11, 2017 (Date of pronouncement)
DATE: November 4, 2017 (Date of publication)
AY: 2010-11
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S. 68: In the absence of any direct evidence demonstrating that the assessee received cash payment, no addition can be made merely on presumption and surmises and on estimate basis. For making the addition on account of cash component, it is the duty of the AO to bring on record corroborative evidence to establish the fact that the entries made in the seized document were correct

The Assessing Officer has not brought on record any clinching evidence on the basis of any enquiry made by him to demonstrate that the assessee has actually received any cash as per the evaluation sheet from Matrix. Therefore, in the absence of any direct evidence demonstrating that the assessee had received cash payment from Matrix, as shown in the evaluation sheet, no addition can be made merely on presumption and surmises and on estimate basis. For making the addition on account of cash component, it was the duty of the Assessing Officer to bring on record corroborative evidence to establish the fact that the entries made in the evaluation sheet were correct

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DATE: September 18, 2017 (Date of pronouncement)
DATE: November 4, 2017 (Date of publication)
AY: 2005-06
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CITATION:
Bogus capital gains from penny stocks: If the DMAT account and contract note show details of the share transactions and the AO has not proved the transactions to be bogus, the capital gains earned on the said transactions cannot be treated as unaccounted income u/s 68. The fact that the broker was tainted and violated SEBI regulations would not make assessee’s transactions bogus

The AO has treated the share transaction as bogus on the plea that SEBI has initiated investigation in respect of Ramkrishna Fincap Pvt. Ltd. The AO further stated that investigation revealed that transaction through M/s Periwal and Co. on the floor of stock exchange was more than 83%. We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT(A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same

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DATE: April 25, 2017 (Date of pronouncement)
DATE: August 1, 2017 (Date of publication)
AY: 2009-10
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CITATION:
S. 254(2): The amendment by the Finance Act 2016 w.e.f. 01.06.2016 to specify the time limit of 6 months to file a rectification application applies even to applications filed with respect to appeal orders passed prior to the date of the amendment. The Tribunal has no power to condone the delay in filing a Miscellaneous Application

It is to be noted that the earlier period of ‘four years’ has been substituted with ‘six months’ by the Finance Act, 2016 with effect from 01/06/2016. However, we find that no distinction has been made in this section between orders passed before 01/06/2016 and orders passed after 01/06/2016. Moreover, the Tribunal order was dated 22/03/2013 and therefore, the Revenue had ample time to go through the same and pin point the mistakes in the order but it has failed to do so. Therefore, we find no force in these miscellaneous petitions primarily because of the reason that the Statute does not authorize us to entertain any petition which has been filed u/s 254(2) at any time beyond a period of six months from the date of the order

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DATE: May 17, 2017 (Date of pronouncement)
DATE: May 25, 2017 (Date of publication)
AY: 2006-07
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CITATION:
S. 271(1)(c): 'Furnishing of inaccurate particulars of income' and 'concealment of particulars of income' have different connotations. The failure by the AO to specify in the s. 274 notice which of the two charges is applicable reflects non-application of mind and is in breach of natural justice as it deprives the assessee of an opportunity to contest. The penalty proceedings have to be quashed

A perusal of the quantum assessment order reveals that the penalty has been initiated for furnishing of inaccurate particulars of income and concealment of particulars of income which, as per settled legal propositions, are different connotations and carry different meaning and two separate limbs. The same also becomes clear from the language of show-cause notice which states that the assessee have concealed the particulars of income or furnished inaccurate particulars of income. Finally, the penalty has been levied for filing of inaccurate particulars of income and hence concealed particulars of income which shows inconsistent thinking on the part of AO. Undisputedly, the AO was required to specify the exact charge for which the assessee was being penalized which he has failed to do so and the same has resulted into taking away assessee’s valuable right of contesting the same and thereby violates the principles of natural justice

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DATE: May 2, 2017 (Date of pronouncement)
DATE: May 9, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 271(1)(c): Bogus purchases cannot be assessed as 'unexplained expenditure' u/s 69C if the transactions are duly disclosed and payments are through banks. The fact that the sellers are not traceable and the assessee surrendered the bogus purchases does not justify levy of penalty. Mere non-striking of the options in the s. 274 notice does not render the penalty proceedings void if the assessment order shows due application of mind.

Section 69C could not be applied to the facts of the case as the payments were through banking channels which were duly reflected in the books of accounts and therefore, there was no unexplained expenditure within the meaning of Section 69C incurred by the assessee. Further, we find that the assessee was in possession of purchase invoices and various other documentary evidences qua these purchases. A bare perusal of the purchase invoices reveals that the assessee has purchased consumables etc. from the alleged bogus suppliers, which are connected, at least to some extent, with the business of the assessee. The assessee, during quantum proceedings itself filed revised computation of income after disallowing the alleged bogus purchases by citing the reason that the suppliers were not traceable during assessment proceedings. Nevertheless, the assessee was in possession of vital evidences in his possession to prima facie substantiate his purchases to some extent particularly when the payments were though banking channels. Merely because the suppliers could not be traced at the given address would not automatically lead to a conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee

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