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DATE: January 18, 2018 (Date of pronouncement)
DATE: January 23, 2018 (Date of publication)
AY: 2013-14
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S. 2(1A)/ 68: An assessee who understates the consideration received for sale of agricultural land to avoid payment of stamp duty is defrauding the exchequer. He cannot take advantage of his own wrong and is estopped from contending that the amount received from the purchaser is a higher amount than was stated in the agreement. The incremental amount is assessable as ‘income from other sources’ and not as ‘agricultural income’. However, penalty u/s 271(1)(c) cannot be levied for the said wrong claim

Both seller and purchaser are estopped from their act and conduct to take such a self -contradictory plea. Not only the earlier but the later authorities also are the public officers appointed for the collection of taxes contributing to the public exchequer (may be of the State or of the Union) and a person having represented the factum of the transaction in a particular manner at one stage to a public officer and getting a wrongful benefit is estopped to deny the same to the subsequent public authority, both authorities being employee and representative of the government . The principle of estoppel in the light of the provisions of section 115 of the Evidence Act gets attracted in such a case. Even otherwise, recognizing such a transaction will amount to over riding the provisions of Transfer of Property Act and Indian Registration Act. In view of the above discussion, it can be safely held that not only legally but also ethically and morally, the parties to a registered document are not allowed to deny the terms of the document until and unless the very validity or execution of such a document is disputed

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DATE: December 1, 2017 (Date of pronouncement)
DATE: January 20, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 271(1)(c) Penalty: Conflict in law laid down by Bombay, Patna & Karnataka High Courts in Kaushalya 216 ITR 660 (Bom), Maharaj Garage (Bom), Samson Perinchery (Bom), Mithila Motors 149 ITR 751 (Pat) & Manjunatha Cotton & Ginning 359 ITR 565 (Kar) on whether the issuance of a s. 274 notice is merely an administrative device for informing the assessee about the proposal to levy penalty and mere mistake in the language used or mere non-striking of the inaccurate portion invalidates the notice or not explained. Impact of the conflicting law of the High Courts on Benches of the Tribunal in jurisdictional and non-jurisdictional States also explained

The line of reasoning of the Hon’ble Bombay High Court and the Hon’ble Patna High Court is that issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. The Tribunal Benches at Mumbai and Patna being subordinate to the Hon’ble Bombay High Court and Patna High Court are bound to follow the aforesaid view. The Tribunal Benches at Bangalore have to follow the decision of the Hon’ble Karnataka High Court. As far as benches of Tribunal in other jurisdictions are concerned, there are two views on the issue, one in favour of the Assessee rendered by the Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning (supra) and other of the Hon’ble Bombay High Court in the case of Smt. Kaushalya. It is settled legal position that where two views are available on an issue, the view favourable to the Assessee has to be followed

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DATE: January 5, 2018 (Date of pronouncement)
DATE: January 20, 2018 (Date of publication)
AY: 2013-14
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CITATION:
S. 56(2)(vii) Taxability of gifts as income: Meaning of the term "relative" in the context of a Hindu Undivided Family (HUF), and whether if the donor is the mother of the Karta of the HUF, a gift by the mother to the HUF is a gift from a "relative" so as to avoid attracting tax liability explained. All judgements on the subject considered

As per explanation (d) in the definition of “property”, several types of assets are listed including shares and securities. It is not denied that assessee is an HUF, during the year it has received from mother of the Kaka of the assessee HUF a gift of 75,000 shares of a private limited company. Therefore, apparently the provisions of section 56 (2) applies in the case of the assessee. However, proviso to the above section provides that the above clause shall not apply to any sum of money or any property received from any “relative”. Therefore, if such sum or property is received from a “relative” it will not be chargeable to tax under that section. The explanation (e) defines “relatives” in case of a Hindu undivided family as any member thereof. Therefore, if the above assessee, HUF, receives any sum from any member of the HUF then such sum or property received by the HUF assessee will not be chargeable to tax. Therefore, the simple issue that arises to be examined that whether Mrs. Sneh Gupta is a member of the assessee HUF. If she is, then the gift of share is not chargeable to tax in the hands of assessee as income

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DATE: January 9, 2018 (Date of pronouncement)
DATE: January 17, 2018 (Date of publication)
AY: -
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Stay of demand: Pr CIT & ACIT directed to pay personal costs for filing frivolous writ petition to challenge ITAT stay order. Raising unsustainable, illegal and high pitched demands and enforcing coercive recovery and challenging stay orders shows utterly irresponsible and unfair behaviour. Thereafter, seeking adjournments by the Dept of the hearing in the ITAT adds insult to the injury. Irresponsible and uncoordinated manner of the Dept strongly deprecated

It is the unnecessary dogged approach of the Revenue to multiply the litigations in the Constitutional Courts, in turn wasting the precious public hours of time and unholy desire to become a litigant in the Constitutional Courts at Government costs, though there may be absolutely no justification for doing so. The efforts of the Revenue to prove their point that they had a good case on merits before the Constitutional Courts rather than respecting the orders passed by the statutorily created Tribunals not only shows lack of judicial discipline and hierarchical discipline which they should maintain, but treating the constitutional remedies as a vested right with them. The public functionaries and public officials cannot be allowed to spend Government money and public time much less public time of the Constitutional Courts just for the sake of proving their such fictional desires. First raising unsustainable, illegal and high pitched demands and then seeking to coercively recover the same even showing scant regard to the orders passed by highest Tribunal under the Act and for that invoking the writ jurisdiction to seek support to their such effort is nothing but an utterly irresponsible and unfair behaviour. It is the lack of such discipline with the Government Officials which turns Government Departments as a major litigant in the Constitutional Courts, in turn depriving the Constitutional Courts to devote their time for looking into the causes of poor people, which deserve their time and attention of the court more than such Government Departments

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DATE: December 14, 2017 (Date of pronouncement)
DATE: January 13, 2018 (Date of publication)
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S. 12A: CIT is not justified in rejecting registration on the ground that the non-production of books and vouchers means that the genuineness of the charitable activities cannot be verified. The CIT is entitled only to examine the objects of the trust at the stage of registration and not the books of account

While dealing with the application for registration the CIT has to examine whether the application is made in accordance with s. 12A r/w r. 17A and whether Form No.10A has been properly filled up. He may also examine whether objects of the trust are charitable or not. Sec. 12AA nowhere provides that CIT while considering the application for registration is also required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit. The language employed by the legislature in s. 12AA only requires that activities of the trust or institution must be genuine which should be in consonance with the object of the trust. At this stage, the CIT is not required to examine the application of income

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DATE: November 21, 2017 (Date of pronouncement)
DATE: January 11, 2018 (Date of publication)
AY: 1997-98
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CITATION:
S. 271(1)(c) Penalty: The law in Maharaj Garage (Bom) that it is not necessary for the penalty notice to frame a specific charge cannot be followed in the context of whether the notice should specify 'concealment' vs. 'inaccurate particulars' because the judgement does not consider SSA’s Emerald Meadows (SC) and is contrary to Samson Perinchery (Bom)

Judgment of Hon’ble Bombay High Court (Nagpur Bench) in the case of Maharaj Garage & Co. Income Tax Reference No.21 of 2008 has not considered the judgment of Hon’ble Supreme Court in the case of CIT vs. SSA’s Emerald Meadows (supra). Further as discussed above, Hon’ble Bombay High Court has itself in the case of CIT vs. Shri Samson Perinchery (supra) has followed the view taken by Hon’ble Supreme Court in the case of CIT vs. M/s SSA’s Emerald Meadows and CIT vs. Ashok Pai (supra)

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DATE: October 31, 2017 (Date of pronouncement)
DATE: January 11, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 271(1)(c) Penalty: Under Explanation 7 to s. 271(1)(c), the onus on the assessee is only to show that the ALP is computed in accordance with the scheme of s. 92 C in good faith and due diligence. The fact that the TPO changes the method of computation of ALP does not mean it is a fit case for imposition of penalty if there is no dishonesty is found in the conduct of the assessee

The scheme of Explanation 7 to section 271(1)(c) of the Act makes it clear that the onus on the assessee is only to show that the ALP was computed by the assessee in accordance with the scheme of section 92 C of the Act in good faith and due diligence. It is not in dispute here that the ALP was computed in accordance with the scheme of section 92C inasmuch as Cost Plus Method was used. The TPO only substituted Cost Plus Method with TNMM and also computed the ALP of intra group services by taking the ALP as nil by applying the CUP Method. Whatever may be the merits in the action of the TPO changing the method of computation of ALP, the same cannot be a fit case for imposition of penalty inasmuch as it cannot be said that the ALP had not been computed by the assessee under the scheme of section 92C

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DATE: August 22, 2016 (Date of pronouncement)
DATE: January 9, 2018 (Date of publication)
AY: 2007-08
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S. 271(1)(c) Penalty: In the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 to s. 271(1)(c) in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute. It might lead to a rather peculiar situation where the assessees who might otherwise accept such determination may be forced to litigate further to escape the clutches of Explanation 7

The Court is also of the opinion that in the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute. It might lead to a rather peculiar situation where the assessees who might otherwise accept such determination may be forced to litigate further to escape the clutches of Explanation 7

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DATE: January 1, 2018 (Date of pronouncement)
DATE: January 9, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 68 Bogus share capital: Share application money cannot be treated as unexplained credit if the AO does not make any investigation on the documentary evidences filed by the assessee or ask for the production of the investors for examination u/s 131 or if adverse material is found during search to prove that share application money is bogus or an arranged affair of the assessee

The A.O. however, did not make any further enquiry on the documents filed by the assessee-company. The A.O. thus, failed to conduct any enquiry and scrutiny of the documents at assessment stage and merely suspected the transaction between the Investor Company and assessee-company because the Investor Company was from Kolkata. The A.O. thus, did not perform his duties at the assessment stage so as to make addition against the assessee-company. No cash was found deposited in the account of the Investor. Therefore, the totality of the facts and circumstances clearly prove that assessee-company discharged initial onus to prove identity of the Investor Company, its creditworthiness and genuineness of the transaction in the matter

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DATE: February 10, 2015 (Date of pronouncement)
DATE: January 5, 2018 (Date of publication)
AY: 2007-08
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S. 14A/ 115JB: Amount disallowed u/s 14A of the Act cannot be added to arrive at book profit for purposes of section 115JB of the Act

The impugned order of the Tribunal followed its decision in M/s. Essar Teleholdings Ltd. v/s. DCIT in ITA No. 3850/Mum/2010 to held that an amount disallowed under Section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. The Revenue’s Appeal against the order of the Tribunal in M/s. Essar Teleholdings (supra) was dismissed by this Court in Income Tax Appeal No.438 of 2012 rendered on 7th August, 2014. In view of the above, question (b) does not raise any substantial question of law

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