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2023-04-18
Issue No. 274 / April 18th, 2023
Dear Professionals,
We are glad to present to you the 274th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Key Takeaways from Handpicked Rulings
1) HC: Assessee's allegation of Revenue tampering pen drive as 'afterthought'; Denies additional evidence - HC dismisses Assessee’s appeal, upholds ITAT’s order rejecting Assessee’s additional evidence to produce expert opinion of cyber expert with regard to generation of Hash Value Report retrieved from a Pen drive impounded during the survey conducted at the premises of Assessee’s employee; Rejects Assessee’s apprehension of tampering of pen drive while generating Hash Value Report and holds that such report was duly signed by the witnesses and even countersigned by Assessee as well as forensic expert and the Assessee was very well aware of generation of such report; Observes that the Revenue followed the clear procedure and retrieved the Harsh Value Report and Assessee’s allegation of tempering of pen drive was made after long time which is clearly an afterthought, accordingly, ITAT rightly rejected Assessee’s additional evidences; Rejects Assessee’s challenge to survey conducted at Assessee’s employees premises being violative of Section 133A and observes that Explanation to Section 133A includes a place where any one of the three activities stipulated in Section 133A is carried on and excluding the place of residence of Assessee’s employee would completely defeat the legislative intent; Observes that statements recorded at any point of time during the pendency of the proceedings on the description of place is not conclusive in interpreting Section 133A……...Click here to read and download HC Judgment
TS Database Note: [TS-5025-SC-2023-O] SC dismisses Assessee's SLP against HC judgment
2) HC: Debts bad or not , a factual issue; Dismisses Assessee's appeal - HC dismisses Assessee’s appeal, holds that no substantial question of law arises for consideration where ITAT dismissed Assessee’s claim of bad debts in respect of 14 debtors reflecting in books of accounts as not sustainable in absence of evidence showing the nature of business transaction between Assessee and debtors; Observes that claim of bad debt cannot be allowed over vague or general explanation and in absence of clarity in respect of the nature of transactions; Relies on SC rulings in Travancore Tea Estates and Bank of Bihar wherein it was held that whether a debt has become bad or the point of time when it became bad are pure question of fact; Accordingly, holds that for treating a debt as having turned bad, it is necessary to make an objective decision on the facts as to the impossibility of the collection/recovery of debt, such an opinion must be honest and ought to be made after taking into account all the relevant factors, whereas the opinion of the Assessee was neither hones nor objective by the ITAT; Accordingly, holds that no inference is required…………Click here to read and download HC Judgment
TS Database Note: SC in [TS-5080-SC-2022-O] reiterates law on bad debts’ allowability; Disallows deduction where sum not written-off in books as irrecoverable - SC allows Revenue’s appeal against Bombay HC ruling that confirmed ITAT’s order allowing alternate claim for advance written-off as business loss under Section 37(1) which was held disallowable as bad debt under Section 36(1).
3) ITAT: Upholds Sec.69A addition as Assessee fails to discharge burden - ITAT dismisses Assessee’s appeal, upholds addition on account of unexplained cash deposit under Section 69A read with Section 115BBE; Rejects Assessee’s challenge to the assessment under Section 153A in absence of incriminating material found as result of search being contrary to Delhi HC ruling in Kabul Chawla and observes that the limitation to issue notice under Section 143(2) was available before search was conducted, accordingly, merely issuance of intimation under Section 143(1) cannot be construed as completed assessment to invoke the principles laid down in Kabul Chawla ruling; Observes that primary burden is cast on the Assessee to give ‘satisfactory explanation’ of cash deposit under Section 69A, however, Assessee failed to bring sufficient evidence on record of the cash/monetary received from various relatives on different occasions by treating it as exempt under Section 56(1); Accordingly, upholds addition of Rs.3.50 Lac on account of unexplained cash deposit under Section 69A; Assessee during AY 2015-16 deposited cash of Rs. 3.50 Lacs in bank account claiming it as gift received from various relatives on different occasions like Birthday, Diwali and other occasions exempt under Section 56(1); Revenue considered it as unexplained cash deposit under Section 69A which was also affirmed by CIT(A)………………Click here to read and download ITAT Order
4) HC: Absent valid approval under Sec.153D, post-search assessment null & void - HC holds that post-search assessment order passed under Section 153A without proper approval of concerned Additional CIT under Section 153D is null and void; Opines that requirement of prior approval of the superior officer (Addl. CIT) is a mandatory requirement of Section 153D and such approval is not meant to be give mechanically, however, in the present case, approval was granted in a mechanical manner without application of mind; Rejects Revenue’s contention that non-compliance of Section 153D does not entail civil consequences and relies on SC ruling in Sahara India (Firm) Lucknow to observe that the requirement of previous approval of Addl. CIT under Section 153D casts a heavy duty on the said authority to ensure that this requirement is not reduced to an empty formality; Refers to Official Procedure Manual issued by CBDT in February 2003 and observes that the legislative intent under Section 153D is to obtain ‘prior approval’ by AO when he is below the rank of JCIT before passing an order under Section 153A; Assessee was subjected to post-search assessment under Section 153A without requisite approval from Addl. CIT under Section 153D; CIT(A) partly allowed Assessee’s appeal and held that consolidated approval was given by Addl. CIT for AY 2003-04 to 2009-10 and the fact of approval was not required to be mentioned in the assessment order; ITAT held that assessment order under Section 153A passed by AO nowhere reflects the fact that the said order was examined by Addl. CIT before granting approval under Section 153D; Accordingly, HC holds that Addl. CIT did not apply its mind to the relevant assessment records and the assessment order is liable to be quashed due to non-compliance of Section 153D………………. Click here to read and download HC Judgment
5) ITAT: Holds non-resident taxable as split contracts inextricably linked to 'turnkey project' - ITAT holds that the income arising from three contracts actually segmented by non-resident Assessee to distribute tax liability with its Indian subsidiary are inextricably linked to ‘turnkey project’, thus, taxable; However, remits back the matter to the Revenue for determination of profit based on the invoices to be placed on record by the Assessee under all the heads of the contract and recompute the income offered by it over various years; Assessee, a Germany-based company, having wholly owned subsidiary in India was awarded a turnkey project by automobile manufactures including Ford; For the purpose of tax, Assessee split the said project into three contracts including: (i) Offshore supply, (ii) Supervision Charges and (iii) Installation and Commissioning of project wherein the income from installation and commission segment was offered to tax by the subsidiary and income from off-shore supply and supervision was offered to tax by Assessee in India; Revenue held that all the three contracts are inextricably linked to turnkey project and accordingly, the profit element of three contracts was held taxable on ad hoc basis. ………………Click here to read and download ITAT Order
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“Taxsutra Database”, a true Income-tax research tool, is an archive of over 121515+ 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:
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