Issue No. 261 / May 20^th, 2022   

Dear Professionals,    

We are glad to present to you the 261^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!  

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Expert Column 

The Supreme Court decided the controversial issue of validity of notices issued u/s 148 between April 01, 2021 to June 30, 2021 which was followed by CBDT Instruction No. 1/2022 dated May 11, 2022 providing its interpretation of the judgment and the uniform procedures to be followed by the Revenue.

Mr. Dharan Gandhi (Advocate) analyses the Supreme Court decision together with the CBDT Instruction and highlights the issues arising out of such Instruction. The author contemplates the term, "to travel back in time" used in the CBDT Instruction in the context of application of amended Section 149 and apprise that the theory of travel back in time was specifically negated by the High Courts. The author highlights the Supreme Court direction that the notices u/s 148 be deemed to be issued u/s 148A(b) of the Act, however all the defences of the assessees have been kept open and opines that, "Court has only dispensed with the prior inquiries u/s 148A(a) of the Act, but has not dealt with the approval of specified authority u/s 148A(b) of the Act." The author lastly emphasises that the CBDT Instruction only represents the views of the Department on the Supreme Court Judgment and the  same is not binding on anyone except the Revenue.

Click here to read the article titled "Buckle up for Round 2!!"

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The old reassessment regime has been fundamentally changed by the amendments introduced in Finance Act 2021 with subsequent amendments in the Finance Act 2022, through which a legal authorization is provided to Revenue to reopen the assessment based on the “information” which is defined specifically.

Mr. Viral Shah (Chartered Accountant) in this article discusses the Supreme Court decision wherein it is directed that the notices issued u/s 148  aissued after April 1, 2021 under the old regime will be deemed to have been issued u/s 148A(b) under the new regime. To provide the background of the controversy the author highlights that the notices were issued under the old regime pursuant to the extension granted vide Notifications dated March 31, 2021 and April 21, 2021, meanwhile the old reassessment regime was substituted by new reassessment regime vide Finance Act 2021. The author emphasises that the High Courts of the various jurisdictions have quashed the reopening of assessment under the old regime, however, SC has validated such notices deeming it to be issued under new provisions. The author underscores that the Supreme Court invoked the provisions of Article 142  of the Constitution of India whereby the present order shall be governing cases where orders are passed by the HC as well as where appeals on similar matters are pending before the HC at PAN India level. The author opines that the Supreme Court order has definitely quietus the litigative issue which was persisting PAN India, however, it will likely be the source of new litigation issues.

Click here to read the article titled "SC on reopening cases – Notices issued under old provisions to be reinforced under new provisions"

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Key Takeaways from Handpicked Rulings 

1) ITAT: Merely disowning bank accounts not conclusive transactions undertaken - Delhi ITAT rejects submission on behalf of the assessee that the entire deposits in the bank account did not belong to him and therefore, there is no real income accrued or received to the assessee; Remarks that firstly, there are actual deposit in the bank account of the assessee for which no explanation about the nature and the source was explained which has led to addition u/s 68; Secondly, Section 68 is a deeming provision wherein the statute provides that if the assessee is unable to explain the nature and source of the credits, then it is deemed to be income of the assessee as undisclosed sources and is taxed accordingly; Provisions of Section 68 apply to all credit entries in the cases including where credit entry has been made in the bank account of the assessee, if the assessee fails to offer any explanation fully corroborated and substantiated by evidences; The ambit of Section 68 is wide and inclusive and this provision applies to all credit entries either in the books of accounts or the bank account of the assessee because the bank account itself forms the account of the assessee where the assessee credits the amount for which he is required to explain the nature and source of such credit; The language of Section 68 applies to all credit entries in whomsoever name they may stand, that is, whether in the name of the assessee ………..……. Click here to read and download ITAT Order

2) ITAT: Allows FTC, holds requirement to furnish Form 67 directory - Bangalore ITAT allows Assessee’s appeal, holds that requirement to furnish Form No. 67 cannot be treated as mandatory to be directory in nature and that Rule 128 does not provide for disallowance of foreign tax credit (FTC) on non-furnishing of Form No. 67 within prescribed time……………….Click here to read and download ITAT order

3) ITAT: No distinction in Sec.80P for income from long term & short term investments; Allows deduction - Panaji ITAT allows co-operative bank's appeal, sets aside the order passed by CIT(A) holds that Section 80P does not make a distinction between the long term investments and short term investments, the only requirement under the provisions of section 80P(2)(d) is that an interest income or dividend income should be earned by a co-operative society from another co-operative society….…………. Click here to read and download ITAT Order

4) ITAT: Interest on deposit with the co-operative bank eligible for deduction u/s 80P(2)(d) - Ahmedabad ITAT allows co-operative society's appeal, holds that interest from deposits made co-operative banks is eligible for deduction under Section 80P(2)(d) but not the interest from deposits with nationalized banks; The assessee on entire interest income claimed deduction under section 80P(2)(d) while the Revenue held that such interest income was not eligible for deduction u/s 80P(2)(d) as the same is not arising from the deposits with the co-operative societies. ITAT notes that impugned amount of interest of Rs 21 lakh consists of interest from the co-operative banks as well as from the nationalized banks amounting to Rs 16 lakh and 4 lakh respectively.….…………. Click here to read and download ITAT Order

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