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2025-03-20
Issue No. 286 / March 20th, 2025
1) HC: Upholds Single Judge judgment condoning the delay in filing refund application. HC upholds the Single Judge Bench judgment setting aside Revenue’s order rejecting Assessee’s application for condonation of delay and restored Assessee’s application for reconsideration; Considers Revenue’s contention that the Assessee filed ITR for relevant AY 2013-14 belatedly and further delayed filing of application for condoning the delay under Section 119(2)(b); Refers to CBDT Circular No.9/2015 which prescribes a period of six years for filing the refund application and as the condonable limit of delay and Para 6 of the Circular also provides for admission of belatedly filed application for refund; Notes that a request was made for refund in the very ITR itself that had remained unconsidered and subsequently a formal application was also made; Opines that, “when the request is made, that date has to be kept in mind for reckoning the delay and while considering its condonation. The subsequent date on which formal application is made thus pales into insignificance”; Relies on Kerala HC judgment in K.C. Antonny wherein it was held that the delay to be condoned was not to be considered with reference to the date on which the application under Section 119(2)(b) was filed, but with reference to the date on which the 'application for refund' (here in this case the return of income) was filed; Thus dismisses Revenue’s writ appeal
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2) HC: Deletes capital gains addition as there is no transfer u/s 2(47) under the development agreement. HC quashes ITAT order confirming CIT(A) and assessment order holding that the development agreement between the Assessee and a builder, amounts to transfer as the same is covered under Section 2(47)(v), thus the Assessee liable to the capital gains tax for the relevant AY 1997-98, by finding the impugned order to be unsustainable; Observes that the Assessee, entered into a development agreement with a builder for construction of residential flats on sharing basis and Revenue made addition of Rs. 13.78 lacs as long term capital gain; Having perused the development agreement, HC opines that even though there is a contract to transfer the immovable property, which is signed by the parties, yet the contract has not been executed for consideration, and the sum received by the Assessee of Rs. 2 Lacs is only the performance guarantee which is refundable and the same has not been paid by way of consideration of the transaction; Observes that the developer has been handed over the possession for the limited purpose of carrying out the development work; Thus holds that in pursuance of the development agreement, the possession of the immovable property has not been handed over to the developer as contemplated under Section 53A of the Transfer of the Property Act, 1882, thus the same does not fall within the definition of 'transfer' under Section 2(47); Finds that in the instant case under the development agreement there is no transfer and the consideration has also not been paid, thus the Assessee cannot be held liable to capital gains tax.
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3) HC: Quashes best judgement assessment framed by transferring Assessee’s case without complying with Sec. 127. HC quashes the best judgment assessment under Section 144for the AY 2009-2010 framed in pursuance of transfer of Assessee’s case from ACIT, Delhi to ITO, Baddi, for failure to comply with Section 127; Observes that Section 127 requires the Revenue to fulfil the twin conditions for transferring Assessee’s case which are: (i) the assessee should have been given a reasonable opportunity of being heard and (ii) the reasons for transfer should have been recorded; Finds that the said procedure has not at all been complied with; Rejects Revenue’s argument that Section 127was not attracted to the instant case as it was ITO, Baddi alone who had the authority to issue notices under Section 143(2) read with Section 142 (1) holding the same to be untenable; Notes that the Assessee was filing the ITR with ACIT, Delhi ever since the date of inception, thus the ITRs could not have been unilaterally transferred to ITO, Baddi, without complying with the provisions of Section 127; Opines that, “an order passed in absence of any reasons for transfer has essentially to be construed to be the one as having been passed without application of mind”
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4) HC: Holds Assessee liable for interest u/s 220(2) for failure to pay tax demand within stipulated time. HC upholds the ITAT order confirming the levy of interest on the Assessee for not paying the amount of tax within the stipulated time under Section 220(2); Observes that Section 220(2) clearly reveals that the Assessee is liable for payment of interest if the tax amount demanded under Section 156 was not paid within the stipulated time; Observes that the Assessee was held liable to payRs. 1.63 Lacs as interest as he had not paid the amount of tax within the stipulated time; Opines that since the Assessee has not paid the demanded amount of Rs. 1.63 Lacs towards tax due, within the stipulated period, the Revenue rightly exercised the powers conferred under Section 220(2); Thus, dismisses Assessee’s appeal.
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5) HC: Quashes prosecution sans wilful default in tax payment. HC quashes prosecution launched against the Assessee for wilful attempt to evade tax under Section 276C(2) r.w. Section 278B; Relies on Co-ordinate bench ruling in Unique Trading Company and observes that the Assessee by filing returns, declaring the tax liability and also requesting the Revenue to grant instalments, which shows that such attempts cannot be considered as wilful default in making the payment, which is sine qua non for launching prosecution; Further notes that the Assessee ultimately deposited the tax amount during the year 2017-18 whereas the complaint is filed in the year 2019 and that too, without disclosing such payments; Thus holds the prosecution launched against the Assessee is liable to be quashed holding the same to be an abuse of the process of law as no purpose would be served in continuing with such a complaint.
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6) HC: Assessee formed by converting a partnership firm in private company, eligible for Section 80-I deduction. HC holds the Assessee is entitled to the benefit under Section 80-I and the consequent benefit of deduction for the unexpired period. Notes that the Assessee was formed by conversion of a partnership into a private limited company, and all the assets and liabilities of the firm were taken over by the Assessee. Revenue disallowed the deduction claimed under Section 80(I) on the ground that out of the total plant and machinery worth Rs. 2.41 Lacs the machinery taken over by the Assessee was of the value of Rs. 1.03 Lacs and the explanation to Section 80(I)(2) and the proviso thereto provided that the total value of plant and machinery transferred should not exceed 20% of its value used for machinery or plant. Observes that Section 80-I allows deduction in respect of profits and gains to a firm or a proprietorship concern upto 20% of the such profits and gains, while deductions on the profits is available upto 25% to a private limited company, therefore apparently the partnership firm was converted into the private limited company. Further notes that the CIT(A) and ITAT rejected Assessee’s appeal holding that benefit of Section 80(I)was to be given only if the undertaking was not found by splitting up or reconstruction of business already in existence or by transfer to new business machinery or plant previously used for any purpose. Relies on Allahabad HC judgment in Prisma Electronics and SC judgment in Chetak Enterprises, wherein it was held that benefit under section 80-IB is available to the partnership firm and the conditions imposed under section 80-IB(2)(i) does not come in the way. Thus allows Assessee’s appeal.
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7) ITAT: Deletes penalty u/s 271(1)(c) for inaccurate particulars of income, since bogus expenses not added to income. ITAT upholds CIT(A) order deleting penalty under Section 271(1)(c) levied for filing inaccurate particulars of income. Observes that the Assessee showed purchases of Rs. 22.62 Cr which were reflected under WIP and Revenue levied penalty on the same holding that it had effected profit and loss account. Concurs with CIT(A) that trigger for levy of penalty u/s 271(1)(c) will arise when some addition is made to total income or loss is reduced and expenses claimed as WIP had no effect on profit and loss account. Agrees with CIT(A) observation that tax would be sought to be evaded if there is a corresponding addition to the income, which would indicate that higher taxes were payable and the said taxes have not been paid or have been evaded by virtue of such income being evaded or not being disclosed and in absence of such addition which would form the basis for levy of penalty, the penalty is not liable to be levied.
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8) HC: Reasons to must believe’ be based on material evidence, not conjecture or gossip. HC allows Assessee’s writ petition challenging reassessment notice under Section 148. Holds that mere change of opinion cannot be a basis for reopening completed assessment and would be applicable only to situations where the Revenue applied his mind and took a conscious decision on the particular matter. Relies on SC judgment in Mangalam Publications wherein it was held that the expression “reasons to believe” means reasons deducible from the material on record and which have a live link to the formation of belief that income chargeable to tax escaped assessment and such reasons must be based on material and specific information obtained subsequently and not on the basis of surmises, conjecture or gossip and the reasons must be bonafide. Notes that the Assessee was subject to a thorough audit relating to the inspection of all books and records relating to FMMC transactions for the FY 2017-18. Points out that the Revenue has no power to review only the power to reassess, however the reassessment has to be based on the fulfilment of certain precondition and if the concept of “change of opinion” is removed then in the garb of re-opening the assessment, review would take place. Observes that no fresh facts were discovered by the Revenue which was not previously disclosed to the Revenue. Thus, opines that in the facts and circumstances of the present case, in the garb of reopening the assessment, the review would take place.
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9) ITAT: SAP Software and Microsoft License Fee not royalty and ICT Service Charges not FTS. ITAT holds Assessee’s receipts towards SAP Software and Microsoft License Fee to be not chargeable to tax as royalty, by relying on co-ordinate bench order in Assessee’s own case for AY 2018-2019, 2019-2020. Assessee’s receipts for software License fees and Microsoft license fees are not in the nature of royalty, by relying on SC judgment in Engineering Analysis; Further holds that receipts on account of Information & Communication Technology Service Charges (“ICT Service Charges”) to be not FTS under Article 12 of DTAA, by relying on Assessee’s own case for AY 2017-18.
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