Issue No. 265 / 8^th Aug, 2022

Dear Professionals, 

We are glad to present to you the 265^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!  

Journals Current Status

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Expert Column

Application of mind by the authorities specified under statutes is a sine qua none while forming subjective opinions based on facts and circumstances.

Malay Chaturvedi (Advocate) analyses the Supreme Court's views on the principles of satisfaction & approvals. He discusses the recent Supreme Court ruling in Amrendra Kumar Pandey [TS-5057-SC-2022-O], wherein the principles of statutory approval/satisfaction have been laid down. The author highlights that the subjective opinion or satisfaction can be judicially reviewed to find a reasonable nexus between the facts or circumstances on which authorities’ opinion is based and the purpose for which the power is to be exercised and if it is found that the opinion is not supported by any evidence whatsoever, the same can be quashed. He remarks that, "The distinction between insufficiency or inadequacy of evidence and no evidence must of course be borne in mind." He further points out that, the essence of approval is not the certification but the independent application of judicious mind on facts and circumstances, thus, concludes that, "principle of pervading Quasi-Judicial Sense should be tested at all stages till the approval/satisfaction is granted under the statutory provisions of the Act, within the jurisdictional parameters by accomplishing purposive construction of the statute."

Click here to read this riveting article titled “Statutory Authority's Satisfaction & Approval - Legal Principles”

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Key Takeaways from Handpicked Rulings 

1) ITAT: Cash deposit not found credited in books, not taxable under Sec.68 – ITAT holds that cash deposit not found credited in the books of account, cannot be treated as cash credits taxable u/s. 68. ITAT followed Bhaichand N. Gandhi [TS-5090-HC-1982(Bombay)-O] wherein it is observed that a bank pass book or bank statement cannot be considered to be a 'book' maintained by the assessee for section 68 of the IT Act. ITAT sets aside CIT(A) order and directs AO to delete the addition made u/s 68………………..Click here to read and download ITAT Order

Note: Agra Bench of ITAT in [TS-8308-ITAT-2019(Agra)-O] and Delhi Bench of ITAT in [TS-8309-ITAT-2019(DELHI)-O] had distinguished Bhaichand N. Gandhi [TS-5090-HC-1982(Bombay)-O] and holds that the definition of the "books of  accounts' as prescribed u/s 2(12A) inserted by the FA, 2001 w.e.f  1/6/2001 – Bank Pass book is the property of the assessee maintained by the bank, and therefore, rigors of section 68 are applicable to unexplained entries in the pass book, and will amount to credit in the books of account. Further Karnataka HC in [TS-6703-HC-2021(Karnataka)-O] held that even if the bank passbook / statement is not treated as books of accounts u/s 68, the same can be used to make addition u/s 69 of the Act.

2) HC : Upholds auction as notice of time, place duly give to Assessee; Dismisses allegation of material irregularity - HC dismisses Assessee’s writ petition, upholds the auction conducted by revenue for recovery of tax dues and rejects the allegation of material irregularity in terms of Rule 52 and 53 of the Schedule II; Assessee had tax arrears of Rs.29.84 Cr for the period prior to the year 2008 and several outstanding to its customers including registered and unregistered shareholders, amounts due to Repco Bank and Municipal dues; To recover the outstanding dues, Revenue attached Assessee's property and proceeded for sale of property through auction; After unsuccessful attempts, Revenue in third attempt issued notice to auction the property and finally conducted the auction at Rs.3.38 Cr; Assessee through the present writ petition alleged material irregularity in the auction conducted by the Revenue with respect to Rules 52, 53 and 54 of Chapter III of the Second Schedule and contends that if the said rules were properly followed, Revenue would have fetched a higher bid amount; Revenue contends that after hearing the Assessee on fixing and drawing up the proclamation of sale and settling the term thereof a proclamation of sale deed was issued where the reserved price was fixed as Rs.3.33 Cr which was earlier fixed at Rs.4.70 Cr while the market price was fixed at Rs.4.66 Cr; HC rejects Assessee's argument and observes that Rule 52 and 53 ……………………..Click here to read and download HC Judgment

3) HC : Ad hoc disallowance without rejecting books, impermissible; Dismisses appeal sans substantial question of law - HC dismisses Revenue’s appeal as bereft of substantial question of law; Upholds ITAT order setting aside the ad hoc disallowance of expenditure made to transport creditor by merely relying on the similar disallowance made in the preceding AY and without rejecting the books of accounts under Section 145; Holds that the Revenue arbitrarily rejects the plausible explanation of Assessee for not producing the evidence to substantiate the genuineness of alleged transport creditor; Also holds that the question of law raised by the Revenue and admitted by the coordinate bench in absence of representation by Assessee lacks characteristics of substantial question of law as mandated under Section 260A; Further observes that Revenue fails to discharge its duty under Section 131 in summoning the accounts/documents from custody of CBI to assess the genuineness of the alleged creditor;  Assessee, a partnership firm, engaged in the business of construction & transport operations; During the assessment proceedings for AY 2009-10, Revenue directed Assessee to furnish details of expenditure of Rs.70.68 Cr made to transport creditors, Assessee could not produce and contended that all books and documents including the details required by the Revenue were in custody of CBI; Revenue rejected the contention and treated the transport creditors as non-genuine and thereby made an addition of Rs.5.89 Cr on account of excess trade liability ……………………..Click here to read and download HC Judgment

4) HC: Quashes prosecution against Director for Company's offence, absent specific sanction - HC allows petition challenging the prosecution launched against the Director, for non-filing of return by the Company within prescribed time, thus, quashes the complaint against and all proceedings emanating therefrom; Holds that in absence of specific sanction and an intention to prosecute the Director under Section 279, the Revenue cannot prosecute the Director while prosecuting the Company for offence under Section 276CC; Petitioner-Individual, Director of ASM Traxim Pvt. Ltd., was subject to a criminal prosecution for non-filing of Income Tax Return for AY 2012-13 under Section 276CC read with Section 278B pursuant to which the ACMM (Special Acts) directed for framing of charges since sufficient material was available on record to establish the case against the Director which was also allowed by the Special Judge; On petition by the Director. ……………………..Click here to read and download HC Judgment

5) HC: Sets aside reassessment notice issued by invoking Sec.150, absent ‘direction or finding’ by CIT(A) - HC rules in favour of Assessee, sets aside notice issued under Section 148 initiating reassessment proceeding based on CIT(A) order in associate company’s case; For AY 2010-11, Revenue framed assessment order in case of Dinar Tarcar Resources Pvt. Ltd. (DTRPL), wherein the Assessee was director/shareholder, making addition of Rs.17.19 Cr under Section 2(22)(e), however CIT(A) held that deemed dividends could not have been brought to tax in the hands of DTRPL but that the same could have been brought to tax in the hands of the shareholders of DTRPL; Basis the aforesaid CIT(A) order, Revenue initiated reassessment proceedings on the Assessee-individual under Section 148 read with Section 150; HC observes that the conjoint reading of Section 150 and Explanation 3 to Section 153 would mean that to sustain a reassessment in terms of Section 150, Revenue needs to satisfy two conditions amongst others:- (a) The assessment or reassessment or recomputation must be in consequence of or to give effect to ‘any finding or direction’ contained in an order passed by any authority in any proceedings under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law; and (b) The finding or direction contained in the order referred to above must have been……………………..Click here to read and download HC Judgment

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