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DATE: December 23, 2019 (Date of pronouncement)
DATE: January 11, 2020 (Date of publication)
AY: 2013-14
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CITATION:
S. 147 vs. S. 263: If the AO has incorrectly or erroneously applied law and income chargeable to tax has escaped assessment, the Revenue should resort to s. 263 and revise the assessment and not reopen u/s 147. When matter was referred to the CIT for seeking approval, instead of holding that the matter falls u/s 263 and not u/s 148, has given approval u/s 151 which shows non-application of mind and mechanical grant of approval. Therefore, the assumption of jurisdiction u/s 147 cannot be sustained and is held as invalid in eyes of law

In such a situation, where the Assessing officer has incorrectly or erroneously applied law and income chargeable to tax has escaped assessment, the Revenue is not without remedy and resort to provisions of section 263 could have been made by the ld CIT. In fact, the revisionary jurisdiction u/s 263 is meant to deal with such type of cases where the ld CIT can step-in and correct the Assessing officer. In the instant case, the original assessment proceedings were completed vide order u/s 143(3) dated 29.02.2016 and therefore, the provisions of section 263 could have been invoked by the ld CIT by 31.03.2018. However, instead of invoking the revisionary jurisdiction u/s 263 by ld. CIT, the Assessing officer has assumed the jurisdiction u/s 147 of the Act by issuance of notice dated 28.02.2017. Interestingly, for such assumption of jurisdiction, the ld CIT has accorded the approval u/s 151 of the Act. It is therefore a case where matter was referred to the ld CIT for seeking his approval and the ld CIT instead of holding that the matter falls under section 263 and not under section 148 has given the approval u/s 151 of the Act which shows non-application of mind and mechanical grant of approval

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DATE: August 22, 2019 (Date of pronouncement)
DATE: September 14, 2019 (Date of publication)
AY: 2012-13
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CITATION:
S. 10AA/ 115JB: Even income arising from the business of a SEZ Unit, which is exempt u/s 10AA, is subject to MAT from AY 2012-13 onwards owing to the insertion of the proviso to s. 115JB(6). The earlier judgements holding that the exemption provisions would prevail over s. 115JB are not good law after the insertion of the proviso to s. 115JB(6) (CBDT Circular No. 2/2012 dated 22.5.2012 referred)

It is thus seen that the Special Economic Zones Act, 2005 had initially inserted sub-section (6) in section 115JB of the Act to provide that the provisions of section 115JB shall not apply to income accrued or arising on or after 1-4-2005 from any business carried on, or services rendered, by an entrepreneur in a unit of SEZ or a developer of SEZ. Thus, a company carrying on the specified business in a unit in SEZ or as a developer of SEZ was not liable to pay MAT on the profits derived from the said business. However, the Finance Act, 2011 brought-in a sunset clause and inserts a proviso to sub- section (6) to provide that, with effect from 1-4-2012, the provisions of sub- section shall cease to have effect. Accordingly, a SEZ developer or any entrepreneur carrying on business in an SEZ unit (being a company) would be liable to pay MAT on the profits arising from the development of SEZ or the business carried on in an SEZ unit with assessment year 2012-13 and onwards

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DATE: January 30, 2019 (Date of pronouncement)
DATE: February 23, 2019 (Date of publication)
AY: 2006-07, 2007-08
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CITATION:
S. 147 Reopening of s. 143(1) Intimation for Bogus share capital: The AO cannot reopen without establishing prima facie that assessee's own money has been routed back in form of share capital. While he can rely on the report of the Investigation Wing, he has to carry out further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment. In absence thereof, the assumption of jurisdiction u/s 147 has no legal basis and resultant reassessment proceedings deserve to be set-aside

Based on perusal of the report of the DIT, Investigation Wing, New Delhi, the Assessing officer has formed not merely a prima facie belief but has reached a conclusion that the assessee has routed back his undisclosed income in the form of share capital. For reaching such a decisive finding that it is assessee’s undisclosed income which has reached the investor company and thereafter, the latter has invested the amount so received in the assessee’s company by way of share capital, there is nothing which has been stated in the reasons so recorded. As we have noted above, the satisfaction of the Assessing officer should be discernable from the reasons so recorded only and nothing can be added or supplemented to the reasons.

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DATE: August 29, 2018 (Date of pronouncement)
DATE: September 13, 2018 (Date of publication)
AY: 2014-15
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CITATION:
S. 68 Bogus capital gains from penny stocks: Reliance by AO on statements recorded by the Investigation Wing to conclude that the capital gains are bogus without giving an opportunity of cross examination is a complete violation of principles of natural justice as held in CCE Vs Andaman Timber Industries 127 DTR 241(SC). The AO has not controverted the evidence of purchase bills, payment of consideration through bank, DEMAT account, allotment of amalgamated shares, sale of shares through stock exchange at prevailing price, payment of STT etc

The Assessing Officer has not brought any material on record to controvert the fact duly established by the supporting evidence of purchase bills, payment of consideration through bank, dematerialization of shares in the DEMAT account, allotment of the shares amalgamated new entity in lieu of the earlier two companies of equal number of shares. Sale of shares from the DEMAT account through stock exchange and at the prevailing price as on the date of sale and further payment of STT on the transaction of sale has been duly established. In absence of any contrary fact, the mere reliance by the Assessing Officer on the report of Investigation Wing, Kolkata is not sufficient to establish the fact that the transaction is bogus.

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DATE: August 29, 2018 (Date of pronouncement)
DATE: September 8, 2018 (Date of publication)
AY: 2008-09
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CITATION:
Though s. 206C does not impose any limitation period for the AO to hold the assessee to be in default for collection of tax at source, a reasonable time limit of four years has to be read into the statute. Orders passed after this period are beyond the limitation and are void. The fact that the Dept became aware of the default later is irrelevant. The fact that the assessee admitted his liability is also irrelevant

There is no dispute that Section 206C or any other provisions of the Income Tax Act do not provide any limitation for passing the order by the Assessing Officer U/s 206C(6)/206C(7) of the Act holding the assessee in default due to failure to collect tax at source. However, non-providing the limitation in the statute would not confer the jurisdiction/powers to the Assessing Officer to pass order U/s 206C at any point of time disregarding the amount of time lapse from such default of collection of tax at source

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DATE: August 21, 2018 (Date of pronouncement)
DATE: September 1, 2018 (Date of publication)
AY: 2006-07, 2009-10
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CITATION:
S. 147/ 151: S. 150(1) overrides s. 149 but not s. 151. Accordingly, even if the assessment is reopened to make reassessment in consequence of or to give effect to any finding or direction of the appellate authority, the requirement of sanction u/s 151 is mandatory for issuing notice u/s 147. The failure to obtain sanction renders the reopening invalid

even if the assessment is reopened to make reassessment in consequence of or to give effect to any finding or direction of the appellate authority the requirement of sanction U/s 151 is mandatory for issuing notice U/s 147 of the Act. Even otherwise from the plain reading of Section 150(1) of the Act, it is clear that it begins with non-obstante clause as far as the limitation provided U/s 149 of the Act and therefore, Section 150(1) has an overriding effect on Section 149 and not over Section 151 of the Act. The requirement of sanction U/s 151 of the Act is in the nature of check and balance and it is a measure against the misuse of power by the assessing authority for assessment or reassessment based the reasons not found satisfactory by the authorities provided U/s 151 of the Act

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DATE: July 16, 2018 (Date of pronouncement)
DATE: August 2, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 10(38) Bogus long-term gains from penny stocks: The transaction cannot be treated as bogus until and unless a finding is given that the shares were acquired by the assessee from the person other than the broker claimed by the assessee. The enquiry conducted by the Investigation Indore is not a conclusive finding of fact in view of the fact that the shares were duly materialized & held in the d-mat account. Merely supplying of statement to the assessee at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assessee

The decision of the AO holding the transaction as bogus and denying the claim of long term capital gain under section 10(38) of the Act is based on suspicion without any material evidence to controvert or disprove the evidence produced by the assessee. The enquiry conducted by the ITO Investigation Indore is not a conclusive finding of fact that the transaction of purchase of shares by the assessee is bogus particularly in view of admitted fact that these shares were held by the assessee and were duly materialized in the d-mat account. Therefore, until and unless a finding is given that the shares were acquired by the assessee from the person other than the broker claimed by the assessee, the mere suspicion how so ever strong may be, cannot be a basis of addition or disallowance of claim

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DATE: May 25, 2018 (Date of pronouncement)
DATE: June 11, 2018 (Date of publication)
AY: 2006-07, 2007-08, 2008-09
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CITATION:
S. 251(1): While the CIT(A) has the power to "enhance the assessment", he has no power to travel beyond the subject-matter of the assessment and is not entitled to assess new sources of income. In order for the CIT(A) to enhance, there must be something in the assessment order to show that the AO applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection (all judgements considered)

The principle emerging from various pronouncements of the Supreme Court is that the first Appellate Authority is invested with very wide powers under Section 251(1)(a) of the Act and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance and ranges over the whole assessment to correct the Assessing Officer not only regarding a matter raised by the assessee in appeal but also regarding any other matter considered by the Assessing Officer and determined in assessment. There is a solitary but significant limitation to the power of revision: It is not open to the Appellate Commissioner to introduce in the Assessment a new source of income and the assessment must be confined to those items of income which were the subject-matter of the original assessment

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DATE: May 15, 2018 (Date of pronouncement)
DATE: May 24, 2018 (Date of publication)
AY: 2013-14
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CITATION:
S. 40A(3) Rule 6DD: No disallowance can be made for cash payments if the transaction is genuine and the identity of the payee is known. Rule 6DD is not exhaustive. The fact that the transaction does not fall with Rule 6DD does not mean that a disallowance has to be per force made (all judgements considered)

The legal proposition that arises from the above decision of the Hon’ble Rajasthan High Court is that the consequences, which were to befall on account of non-observation of sub-section (3) of section 40A must have nexus to the failure of such object. Therefore the genuineness of the transactions and it being free from vice of any device of evasion of tax is relevant consideration and which should be examined before invoking the rigours of section 40A(3) of the Act

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DATE: June 21, 2016 (Date of pronouncement)
DATE: August 20, 2016 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: Argument that transaction of extending credit period to AEs cannot be regarded as “international transaction” in the absence of any income arising therefrom is not acceptable. Observations in Vodafone vs. UOI 368 ITR 1 (Bom) are in a different context. The transaction of extending credit period to AEs is closely linked with the transaction of providing services to the AE and is not a separate transaction. Both transactions have to be aggregated for determination of ALP

Extending credit period for realization of sales to the AE is a closely linked transaction with the transaction of providing services to the AE and therefore cannot be treated as an individual and separate transaction of advance or loan. Accordingly, we direct the A.O/TPO to redo the exercise of determination of ALP by considering the credit period allowed in realization of sales proceeds as closely linked transaction with the transaction of providing services to the AE and therefore both has to be clubbed and aggregated for the purpose of determination of ALP

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