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2022-04-02
Dear Professionals,
We are glad to present to you the 258th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Period of limitation has taken centre stage over the last two years due to the onset of the pandemic and the same has been one of the main grounds for challenging a notice or an order issued by the tax authorities. In this regard, Ms. Vidushi Maheshwari (Advocate), highlights the significance of the period of limitation especially in tax matters, which is to be adhered by authorities while issuing the notice or passing order and by the taxpayers while filing the appeal. She discusses the recent Allahabad HC ruling in Daujee Abhushan, wherein the issuance of notice was objected to on the ground of being time-barred as the notice was signed digitally on a date within the limitation period but was received after the same had elapsed and the High Court held that merely digitally signing of the notice cannot be termed as issuance of notice. She also discusses Madhya Pradesh HC ruling in Yuvraj, which was rendered on similar issues. She opines that, “The above rulings have a far-reaching impact on the taxpayers, as it is a very common phenomenon to term the notice as issued on the date of signing instead of the actual date of issuance, which may or may not fall within the period of limitation. The rulings will preclude them from issuing any after-thought notices by merely signing them within the period of limitation.” Click here to read, article titled - “Signing of Notice – A Simple Procedure with Significant Impact”
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Key Takeaways from Handpicked Rulings
1) ITAT: Interest on loan taken to deposit under CGDA Scheme not eligible for deduction under Sec.57(iii) - ITAT dismisses Assessee’s appeal hold that since loan borrowed from HSBC Bank was never used for investment to earn interest income, instead used to invest in CGDA Scheme, the interest paid on the borrowings cannot be set off against interest earned from CGDA Scheme; For AY 2015-16, Assessee-Individual sold some equity shares in Rangson Electronics and initially invested the net sale consideration into mutual funds; Subsequently, in order to avail benefit of Section 54F, Assessee invested in Capital Gains Deposit Scheme by taking a loan from HSBC Bank; Assessee claimed interest paid on loan as deduction against interest received from fixed deposit parked under CGDA Scheme u/s 57(iii); Revenue accepted Assessee’s claim whereas PCIT issued notice u/s 263 observing that deduction claimed in respect of interest paid on loan from HSBC against the interest received from the CGDA scheme deposit should have been disallowed and that no enquiry was carried out by Assessing Officer; PCIT rejected Assessee’s objections to notice and passed order u/s 263 holding that assessment order was erroneous and prejudicial to the interest of revenue and directed Assessing Officer to disallow the interest paid against the interest received from …………Click here to read and download ITAT Order
2) HC: AO’s prima facie view based on materials before it sufficient to initiate reassessment proceedings - Bombay HC dismisses Assessee writ petition challenging the notice seeking to reopen assessment and order that followed by observing that from materials placed before it at the time of initiating proceedings, Revenue had prima facie reason to believe that income had escaped assessment for the relevant assessment year; Assessee-firm had not filed returns for AY 2017-18 ; Revenue found cash deposits of Rs. 4.3 Cr made against Assessee’s PAN number in Goa Urban Coop Bank and issued notice seeking to reopen assessment for year under consideration; Revenue disposed of Assessee’s objections by not accepting its contention that no cash was deposited in current account or other account since all Bank Accounts were opened after 31st March 2017; Revenue observes there was reason to believe that income chargeable to tax has escaped assessment and concludes that reopening has been done within time period; Revenue noted return of income has not been filed u/s 139 and placed reliance on Rajesh Jhaveri Stock Brokers; Assessee challenged the notice and order before the HC and contended that during the relevant AY it did not have an account with the bank which was clarified by the Goa Urban Coop Banks communication; HC observes that the letter from the bank was not before the Revenue and therefore it was not taken into account by them; HC also notes that for the relevant AY the Assessee had not filed returns even though prima facie it had made deposit of Rs. 4.39 crores in the non-current account; Holds there is reason to believe that income had escaped assessment and that this is not a case where the Assessee’s objections have not been considered …………Click here to read and download HC Judgment
3) ITAT: Amendment to Rule 8D applicable to AY 2015-16, upholds revision - ITAT upholds revision of assessment order for AY 2015-16 in the light of amendment to Rule 8D that came into effect from Jun 2, 2016; Case of the Assessee was selected for limited scrutiny and PCIT noted that Assessee had earned dividend income of Rs. 27.16 lacs during relevant AY; PCIT observed that on Mar 31, 2016, non-current investments stood at Rs. 249.78 Cr and having earned exempt income, expenditure in relation to income not includible in total income was liable to be disallowed as per Section 14A r/w Section Rule 8D which was not done in assessment order; PCIT invoked Section 263 and gave a finding that as per amended Rule 8D(2)(iii) r/w Section 14A w.e.f. 02.06.2016, the disallowance of expenses has to be computed @1% of the annual average of the monthly averages of the opening and closing balances of the value of investment and directed the Assessing Officer to re-do the assessment; Both Revenue and Assessee challenged this order before ITAT; Assessee submitted that revision order was incorrect insofar as the amended provision had no application to AY 2015-16…………Click here to read and download ITAT Order
4) HC: Reckons limitation period for Sec.264 from Assessee’s knowledge of Sec.143(1) intimation over original email - HC sets aside order rejecting Assessee’s application u/s 264 with the reasoning that intimation u/s 143(1) may have been sent via email in 2014 but was only realized by Assessee in 2019 and therefore petition filed was within time as contemplated u/ s 264; Assessee-petitioner is a doctor and vide notice u/s 226(3) her bank accounts were attached on Mar 26, 2019; On enquiry Assessee realized demand of Rs. 7.95 lacs was intimated u/s 143(1) issued on Feb 19, 2014; Assessee contended she never received intimation and realized there was a mistake in returns filed and filed revision petition u/s 264 which was rejected on the ground that it was highly belated and that intimation was sent to Assessee vide email so no cause remained to invoke Section 264; Assessee challenged order rejection application u/s 264 and contented that she never received any intimation dated Feb 19, 2014 and that there was no material to show such intimation was sent to her email id alongwith the fact that rules for e-communication came into effect only in 2015; Revenue argued that there was delay of more than 5 years in preferring the revision petition u/s 264 and it had no choice but to dismiss the same; HC notes Assessee’s contention that once intimation issued u/s 143(1) came to her knowledge on Mar 26, 2019, Assessee requested for a copy of intimation dated Feb 19, 2014 which was issued along with cover letter dated 15th May 2019, pursuant to which revision petition u/s 264 was filed …………Click here to read and download HC Judgment
5) HC: Upholds reassessment proceeding as AO's reasons independent of Investigation Wing's report- HC upholds re-assessment u/s 147/148, rejects assessee's stand that re-assessment, being based on information received from Investigation wing. Notes that AO pursuant to an information received from the Investigation wing, the AO has conducted an investigation and has gone through the income tax return and other related documents of the assessee and has observed that the assessee is a beneficiary of receiving bogus accommodation entries and it is only thereafter that he has recorded that he has reason to believe that the income has escaped assessment. HC rejects submission made on behalf of the petitioner that the AO has acted on a report of the Investigation wing and he has not recorded his own reasons to believe……………. Click here to read and download HC Judgment
6) HC: Dismisses assessee’s writ, no procedural lapse and irregularity in passing the re-assessment order - Madras HC dismisses writ petition filed by assessee challenging the assessment order. HC rejects assessee submission that pursuant to the notice u/s 148 of the Act, when an objection was submitted, no speaking order was passed on it, rather an assessment order was passed directly. HC notes that the objections raised by the assessee have been dealt with by the Revenue and it was pursuant to the same, the SCN along with draft assessment order was issued to the petitioner and while sending the show cause notice (SCN) and draft assessment order on 24.09.2021, the order on the objections was also sent, after dealing with the objections. When no response to the SCN along with the draft assessment order was received, the final assessment order was passed on 28.09.2021. Thus, it cannot be stated that the assessment order under challenge is without an order on the objections raised pursuant to the notice u/s 148 of the Income Tax Act…………..Click here to read and download HC Judgment
7) SC: Quashes HC order, reproduction of the observations made by the Tribunal without independent reasoning is bad in law. Notes that HC except reproduction of the observations made by the Tribunal, there is no further independent reasoning given by the High Court and nothing has been further discussed on merits and even the substantial question of law has also not been framed.SC sets aside the HC order and remanded back to decide afresh in accordance with law and on its own merits, at the earliest……………Click here to read and download SC Order
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