Issue No. 266 / Aug 26^th, 2022

Dear Professionals, 

We are glad to present to you the 266^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena! 

***********************

Expert Column

Mr. S. Ramanujam (Chartered Accountant) in this article analyses the recent Madras HC ruling on various questions pertaining to search and seizure. The author is of the view that with searches becoming frequent nowadays and covered extensively by the media, it is pertinent that the taxpayers are aware of their rights. He shares his views on various aspects of the judgment that upheld the constitutionality of retrospective amendments made in the search and seizure regime. He also throws light on observations made by the Court while remanding the matter back to the Revenue on validity of search warrant, purpose of special audit etc.

Click here to read this riveting article titled, “New vistas in Search & seizure cases – Madras High Court’s views!”

***********************

Key Takeaways from Handpicked Rulings 

1) ITAT: Non-existence of lenders, clear indication of loan being prima facie bogus - ITAT allows Revenue's appeal, sets aside CIT(A) order and remands back the issue to AO to identity, creditworthiness and genuineness of the transaction; ITAT notes that the persons who have given loan are not present at their address which clearly shows the lack of genuineness of the transactions and receipt of the amount in their bank accounts immediately before giving the loans further cast doubt of the creditworthiness; Before the ITAT, Revenue submitted that this is a classic case of routing of unaccounted money in circuitous manner and merely a transaction having been routed through a banking channel does not prove that the transaction is sacrosanct; The Unavailability of the parties is a clear sign of the transactions not being genuine; ITAT observes that CIT(A) has observed ………………………..Click here to read download ITAT Order

2) ITAT: The word "assess" in section 153A of the Act is relatable to abated proceedings (i.e., those pending on the date of search) and the word "reassess" to completed assessment proceedings -  ITAT holds that a completed assessments can be interfered by the AO while making the assessment u/s 153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment; ITAT further holds that in so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment u/s 153A merges into one and only………………………..Click here to read download ITAT Order

3) HC: Admits Revenue's appeal on whether royalty paid for minerals is 'tax' for Sec.43B - Bombay HC  admits Revenue's appeal on whether royalty payable on mineral extraction is in the nature of tax for the purpose of Section 43B of the Act; Observes that the issue pertaining to nature of royalty is pending for reference to SC bench of nine judges, thus, the Revenue's appeal requires admission; Assessee-Company, engaged in the business of mining, processing and sale of mineral ore was subjected to disallowance of the unpaid amount of royalty by invoking Section 43B and treating royalty payment as "Tax" falling within the scope of the said section; CIT(A) upheld the disallowance and relied on Shanti Saroop ruling wherein it was held that royalty is not a payment of the nature covered within the meaning of Section 43B and observed that royalty is more akin to rent or compensation payable to an owner by the occupier or lessee of land for its use or exploitation of the resources; ITAT relied on SC ruling in Kesoram Industries wherein it was held that royalty is not tax and observed that royalty could not be disallowed under Section 43B of the Act.………………………. Click here to read and download HC admission copy

4) HC : Set aside Sec.148A(d) order, directs Revenue to reconsider Assessee's reply - HC sets aside order under Section 148A(d) and directs Revenue to reconsider the reply of Assessee in pursuance to show cause notice under Section 148A(b) and material placed before it; Also directs Revenue to pass appropriate order under Section 148A(d) by assigning valid reasons to show that it is fit case to issue or not to issue notice under Section 148; Holds that order under Section 148(d) cannot be passed in a mechanical manner without appreciating material available on record and reply of the Assessee; show cause notice was served upon to the Assessee alleging income escaped assessment on ground that alleged bogus transactions with a company were not disclosed in the return of income; Assessee filed reply and explained the nature of alleged transactions and contended that the alleged transactions were duly reflected in return of income; Revenue rejected the objections of the Assessee and held that the case is fit for issuance of notice under Section 148 of the Act, accordingly passed order under Section 148A(d); Before HC, Assessee contended that the order under Section 148A(d) is passed in a mechanical manner without application of mind; Also contended that Revenue did not considered the material placed before it or the averments made in reply to show cause notice and order under Section 148A(d) is passed without assigning any appropriate reason; While, Revenue contended that order under Section 148A(d) is passed after considering the material placed before it by the Assessee and the present case is only at the stage of initation of enquiry as to whether income has escaped assessment ………………………..Click here to read download HC Order

5) HC : Sets aside Sec.148A(d) order passed without considering objections; Directs Revenue to apply its mind - Gujarat HC sets aside the order under Section 148A(d) and directs Revenue to apply its mind and pass an appropriate order dealing with all the objections raised by the Assessee in pursuance to show cause notice under Section 148A(b) of the Act; Holds that there is an obligation cast upon the Revenue in accordance with Section 148A(d) to consider the case not only on the basis available of the materials on record, but also the reply of the Assessee; Assessee-Individual was served with a show cause notice for AY 2018-19 alleging escapement of income on account of non-disclosure of transactions of Rs.180 Cr with respect to accounts in Social Cooperative Bank; Assessee denied the allegation on the ground that one bank account in which transaction of Rs.66 Cr was carried belong to the HUF, the alleged transactions carried out cannot be assessed in the hands of the Assessee in his individual capacity and the other bank account in which transaction of Rs.101 Cr was related to the business of the Assessee carried out in its proprietary concern "Shree Trading Co.' and the same was reflected in the books of the proprietary concern along with the return of income; Revenue rejected Assessee's submission on the ground that requisite documentary evidences were not submitted and accordingly passed order under Section 148A(d) and considered alleged transactions being unexplained and ………………………..Click here to read download HC Order 

*********************** 

About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 118600+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’. It is a completely integrated service with the following features:   

a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;

b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;

c) Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.  

d)Judicial “forward & backward reference”   

The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.