Issue No. 244 / August 25^th, 2021 

Dear Professionals,   

We are glad to present to you the 244^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena! 

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Status of Journals Updated 

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Key Takeaways from Handpicked Rulings 

1) HC : Salary paid to pedagogues liable to TDS - Division Bench of HC dismisses batch of appeals seeking amnesty from paying tax on salaries; Upholds Single-Judge's order that the CBDT 1944 or 1977 Circular does not excludes income of pedagogues from charge of tax and is liable for TDS; Notes that Section 192 does not contemplate any exemption from the liability to deduct tax at source on the basis of the nature of calling, profession, or vocation of the person who receives the salary. If the income payable falls under the head 'Salaries', the statute attaches an obligation to the person paying the salary to deduct TDS. HC rejects Assessees’ submission that as per the canon law, once a perpetual vow of poverty is taken, the nun or priest, as the case may be, undergoes a civil death, and thereafter, they are not 'persons' under the Act and HC held that nuns and priests act like any other living human and the exigibility to tax is governed and controlled by the respective taxing statutes and not by the.............Click here to read and download HC Judgment copy

2) HC: Reassessments based on information from Investigation wing legally tenable - HC dismisses writ petition challenging the reopening proceedings u/s 148 for AY 2012-13 based on reasons to believe on the information received from the Investigation Wing; Assessee-Petitioner was served with a notice u/s 133(6) calling upon for certain information which he failed to respond to; Subsequently he was served a notice u/s 148 to file his return of income for the said AY, in response to which Assessee filed the return of income declaring income of Rs. 1.50 Cr; Revenue, on the basis of information received from DDIT (Investigation), Ahmedabad contended that Assessee was a beneficiary of accommodation entries received of Rs. 20 Lakhs, and an entity ‘Kamdhenu Marketing’ had provided bogus sales entries to the Assessee; Assessee submitted all material facts necessary for assessment were disclosed, and assessment was framed u/s 143(3); It was further submitted that assessment could not be reopened on basis of borrowed belief received from the investigating wing, without verifying the material; Revenue submitted that on account of Assessee’s failure to respond to notice u/s 133(6), notice u/s 148 was issued and assessment was to be re-opened on tangible and credible information from two investigation wings; HC observes in view of the jurisprudence that the expression ‘reasons to believe’ cannot be read to mean that AO should finally have ascertained the fact by legal evidence or conclusion, and the term ‘reason to believe’ would mean cause or justification...................Click here to read and download HC Judgment copy

3) HC: Assessee entitled to reapply on rejection under Industrial Park Scheme - HC dismisses writ against rejection of Assessee’s application under the ‘Industrial Park Scheme, 2002 made after expiry of the said scheme and opines that Assessee is entitled to submit an application under the second scheme notified subsequently; Assessee-Petitioner submitted its application under the said scheme dated Apr 01, 2002 on Dec 15, 2006 which was rejected by the impugned order stating that period mentioned in the scheme has expired and therefore, Assessee was required to submit a fresh application under the new scheme of the year 2008 and its application was rejected; Revenue submitted that since the period of operation of the scheme was upto Mar 31, 2006 Assessee’s application dated Dec 15, 2006 could not be entertained under the scheme; HC, on perusal of the scheme observes that in terms of applicability of the scheme it was clear that any undertaking which develops / develops and operates or maintains and operates an industrial park for the period from Apr’97 to Mar’06 was entitled to avail benefit under the Scheme; It further observes that in respect of the second scheme notified on Jan’08 the benefit was extended in respect of industrial parks commenced between Apr’06 upto Mar’09, and remarks cases where commercial parks commenced in the said period are to be considered under the second scheme; HC holds that in view of the fact that application itself was submitted beyond the period of applicability, it has to be necessarily considered...................Click here to read and download HC Judgment copy

4) HC: Directs Revenue to grant TDS credit for AY 2009-10 following coordinate bench’s ruling - HC directs Revenue to decide the rectification applications filed by Assessee-petitioner in accordance with law, within 12 weeks; Assessee-petitioner filed the writ seeking directions for allowing TDS credit on basis of TDS certificates issued, further for cancellation of consequential demand and penalty notices arising from order u/s 143(1)(a); Assessee, non-resident individuals derived income from house property and bank interest, filed their return of income claiming tax refund of Rs. 2.50 lacs each, which was not granted to them under assessment orders u/s 143(3); Subsequently Assessee filed a rectification us/s 154 stating details of TDS amounts which were not considered as prepaid taxes; It was further submitted that no order was passed u/s 154, and demand was raised without any action being taken on the letters filed by the Assessee; Revenue submitted it had no objection if the writs are disposed with a direction to AO to decide the rectification applications within a strict time frame and considering the...................Click here to read and download HC Judgment copy

5) HC: Approval granted by STPI as 100% EOU insufficient for claim of exemption u/s 10B - HC dismisses Assessee’s writ petition challenging CBDT instruction dated No.2/2009 dated Mar 9, 2009 r/w corrigendum to the instruction issued by the CBDT in the context of 100% EOUs under Software Technology Parks / Electronic Hardware Technology Parks scheme; Assessee company is a Government of India approved 100% EOU, which has been approved by Software Technology Parks of India (STPI) through powers delegated to it by Department of Electronics, Govt of India;Assessee’s case for AY 2006-07 was re-opened stating that it was not entitled to exemption u/s 10B as a 100% EOU since approval granted by Development Commissioners would be valid only if such approval was ratified by Board of Approval (BoA) under EOU scheme; Assessee submitted that a post approval ratification from the BoA was not mandated anywhere under the law in case of 100% EOU under the STP/EHTP scheme; Assessee further contended that approval granted in its favour is deemed to have been granted by the BoA for all purposes; Assessee challenged the validity of the impugned clarification issued stating the same to be violative of the Act; HC on perusal of the approval order issued in favour of Assessee observes that approval has been granted for setting up of 100% EOU under the EHTP scheme of the government and approved by STPI, and remarks that such approval cannot be validated for purpose of claiming exemption u/s 10B;...................Click here to read and download HC Judgment copy

6) HC: Reassessment notice u/s. 148 issued in the name of non-existent entity bad in law, incurable u/s. 292B - HC allows assessee’s writ, quashes notice u/s. 148 issued in the name of a  non-existent entity and the subsequent order rejecting objections raised by assessee; Notes that the reasons issued by the AO itself mentioned the very fact of merger of Neeraj Realtors (noticee) with Alok Knit Exports P Ltd.; Observes that “ the indisputable fact is respondent no.1 has invoked jurisdiction by issuing notice under Section 148 of the Act to an entity that had ceased to exist” , rejects Revenue’s stand that it was an error which could be corrected under Section 292B; Relies on SC decision in the case of Maruti Suzuki, factually, distinguishes SC ruling in Skylight Hospitality.............. Click here to read and download HC Judgment copy

7) HC: Sets aside Faceless Assessment order for violation of natural justice - HC sets aside faceless assessment orders and consequent orders for demand holding the same to be violative of principles of natural justice; Assessee submitted that mandatory valid SCN and draft assessment order was issued before drawing an adverse inference against it qua addition of short-term capital loss of Rs.8.70 Cr leading to a tax demand, thus preferred this writ challenging the same; Revenue submitted that Assessee’s writ was not maintainable considering recourse to alternate remedy available to Assessee; HC observes that the Faceless Assessment Scheme mandatorily provides for issuance of prior SCN and draft assessment order before issuing the final assessment order; HC holds that the Government is bound to follow the rules and standards they themselves had set on their pain of their action being invalidated; HC observes that in absence of SCN and draft assessment order resulted in violation of principles of natural justice, as well as the mandatory procedure under the ‘Faceless Assessment Scheme’; Further remarks that in case where there is violation of principles of natural justice, appeal is not an alternative effective remedy and a writ petition is maintainable; HC, accordingly sets aside the impugned Faceless Assessment order and consequential demand orders and remands matter back to the AO, with a direction to issue SCN and draft assessment order, and passed a reasoned order in accordance with law...................Click here to read and download HC Judgment copy

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