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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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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: April 24, 2018 (Date of pronouncement)
DATE: May 10, 2018 (Date of publication)
AY: -
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When will the Rip Van Winkleism stop and Union of India wake up to its duties and responsibilities to the justice delivery system? To make matters worse, in this appeal, the Union of India has engaged 10 lawyers, including an Additional Solicitor General and a Senior Advocate! In other words, the Union of India has created a huge financial liability by engaging so many lawyers for an appeal whose fate can be easily imagined on the basis of existing orders of dismissal in similar cases. Yet the Union of India is increasing its liability and asking the taxpayers to bear an avoidable financial burden for the misadventure

To say the least, this is an extremely unfortunate situation of unnecessary and avoidable burdening of this Court through frivolous litigation which calls for yet another reminder through the imposition of costs on the Union of India while dismissing this appeal. We hope that someday some sense, if not better sense, will prevail on the Union of India with regard to the formulation of a realistic and meaningful National Litigation Policy and what it calls ‘ease of doing business’, which can, if faithfully implemented benefit litigants across the country

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DATE: April 12, 2018 (Date of pronouncement)
DATE: May 10, 2018 (Date of publication)
AY: 2012-13
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Disallowance u/s 14A & Rule 8D has to be made even if the assessee has not earned any tax-free income on the investment. Cheminvest 378 ITR 33 (Del) is not binding on the AO as it is a non-jurisdictional High Court. CBDT's Circular 5/2014 is in accordance with Godrej & Boyce Mfg. Co. Ltd 394 ITR 449 (SC) & Maxopp Investment Ltd 402 ITR 640 (SC)

The principle that it is the net income, i.e., net of expenditure relatable thereto, which is subject to tax and, correspondingly, not liable to tax, i.e., where it does not form part of the total income, is well established. Equally well settled is the principle that once an income is liable (or not liable) to tax, all expenditure relatable thereto is to be reckoned, and it matters little that the said expenditure has indeed resulted in a positive income, or in whatever sum. It is in fact this, i.e., the expenditure being higher than the gross income, which could be nil, that leads to the phenomenon of loss, which could therefore be across both the categories income, i.e., taxable or non-taxable, being essentially a matter of fact

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DATE: April 20, 2018 (Date of pronouncement)
DATE: May 9, 2018 (Date of publication)
AY: 1997-98
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Court records sincere appreciation for the proactive and sensitive manner in which the CIT has intervened to ensure that injustice caused to the party is addressed. His expression of regret for the inconvenience caused to the Petitioner for acts of his department is gracious and a very commendable and fair gesture, which is rarely noticed on the part of the Revenue. If such conduct would became the norm, the department itself would gain as the fairness in dealing with an assessee would automatically result in greater compliance of the laws by the tax payer. This secure in the belief the tax department would be fair and not treat the assessee as its enemy/adversary

Before parting, we would like to place on record our sincere appreciation for the proactive and sensitive manner in which the Commissioner of Income Tax – Mr. Sachchidanand Srivastava has intervened to ensure that injustice caused to the party is addressed. Moreover, very graciously he places on record his regrets for the inconvenience caused to the Petitioner for acts of his department. This, indeed, is a very commendable and fair gesture, which is rarely noticed on the part of the Revenue. All we can say if such conduct would became the norm, the department itself would gain as the fairness in dealing with an assessee would automatically result in greater compliance of the laws by the tax payer. This secure in the belief the tax department would be fair and not treat the assessee as its enemy/adversary

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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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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 24, 2018 (Date of pronouncement)
DATE: May 3, 2018 (Date of publication)
AY: 2005-06
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S. 40(a)(ia): The amendment to s. 40(a)(ia) by the Finance Act, 2010 w.e.f 01.04.2010 to provide that all TDS made during the previous year can be deposited with the Government by the due date of filing the return of income should be interpreted liberally and equitably and applied retrospectively from the date when s. 40(a)(ia) was inserted i.e., with effect from the AY 2005-2006 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. The amendment is curative in nature and should be given retrospective operation as if the amended provision existed even at the time of its insertion

Hence, in light of the forgoing discussion and the binding effect of the judgment given in Allied Moters 224 ITR 677(SC), we are of the view that the amended provision of Sec 40(a)(ia) of the IT Act should be interpreted liberally and equitable and applies retrospectively from the date when Section 40(a)(ia) was inserted i.e., with effect from the Assessment Year 2005-2006 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. As the developments with regard to the Section recorded above shows that the amendment was curative in nature, it should be given retrospective operation as if the amended provision existed even at the time of its insertion. Since the assessee has filed its returns on 01.08.2005 i.e., in accordance with the due date under the provisions of Section 139 IT Act, hence, is allowed to claim the benefit of the amendment made by Finance Act, 2010 to the provisions of Section 40(a)(ia) of the IT Act.

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DATE: May 2, 2018 (Date of pronouncement)
DATE: May 3, 2018 (Date of publication)
AY: -
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S. 158BB Block Assessment: While it is a cardinal principle of law that in order to add any income in the block assessment, evidence of such income must be found in the course of the search u/s 132, any material or evidence found/collected in a survey u/s 133A which has been simultaneously made at the premises of a connected person can also be utilized while making the Block Assessment. The same would fall under the words “and such other materials or information as are available with the Assessing Officer and relatable to such evidence” occurring in s. 158 BB

It is a cardinal principle of law that in order to add any income in the block assessment, evidence of such must be found in the course of the search under Section 132 of the IT Act or in any proceedings simultaneously conducted in the premises of the assessee, relatives and/or persons who are connected with the assessee and are having transaction/dealings with such assessee. In the present case, the moot question is whether the fact of cash payment of Rs 95.16 lakhs can be added under the head of the undisclosed income of the assessee in block assessment. The power of survey has been provided under Section 133A of the IT Act. Therefore, any material or evidence found/collected in a Survey which has been simultaneously made at the premises of a connected person can be utilized while making the Block Assessment in respect of an assessee under Section 158BB read with Section 158 BH of the IT Act. The same would fall under the words “and such other materials or information as are available with the Assessing Officer and relatable to such evidence” occurring in Section158 BB of the Act. In the present case, the Assessing Officer was justified in taking the adverse material collected or found during the survey or any other method while making the Block Assessment.

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DATE: March 6, 2018 (Date of pronouncement)
DATE: May 3, 2018 (Date of publication)
AY: -
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S. 92CB Transfer Pricing Safe Harbour Rules: If the assessee has exercised the safe harbour option under Rule 10THD(1) & the AO has not passed any order under rule 10THD(4) declaring the exercising of option to be invalid, the option is treated as valid. Thereafter, the Transfer Pricing regime does not apply & the AO has no authority to make any reference to the TPO to ascertain the arm's length price of the assessee's specified domestic transactions. CBDT's circular dated 10.3.2006 could not have and does not lay down anything to the contrary

In the present case, admittedly, after the petitioner exercised such an option, the Assessing Officer passed no order under subrule (4) of rule 10THD declaring that the exercising of option was invalid. In terms of subrule (7) and subrule (8) of the said rule, therefore, the option exercised by the assessee would be treated as valid. Once this conclusion is reached, it follows as a natural and necessary corollary that the Transfer Pricing regime would not apply. That being the case, the Assessing Officer had no authority to make any reference to the TPO to ascertain the arm’s length price of the petitioner’s specified domestic transactions. Reference itself was therefore, invalid. CBDT’s circular dated 10.3.2006 could not have and does not lay down anything to the contrary. The circular merely prescribes the circumstances under which the Assessing Officer would make reference to the TPO. Nowhere does the circular provide that as soon as such circumstances exist, the Assessing Officer would make a reference to the TPO, irrespective of the fact that the assessee had opted for safe harbour and such option was treated or deemed to be treated as validly exercised. Legally speaking, CBDT could not have given any such directive. Eventually no such directive can be discerned from the circular.

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