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ITAT grant`s relief to 'Moin Qureshi'; No immunity from penalty, even if specific charge not mentioned in SCN issued u/s 274

Jun 10, 2020


Issue No. 209 / June 10th, 2020
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Key Takeaways from Handpicked Rulings 
1) ITAT: Profit from undisclosed activity to be undisclosed income for each assessment year - ITAT grants relief to 'Moin Qureshi' (exporter) for past assessment additions over 100cr on computation of undisclosed income undertaking clandestine transactions, holds peak credit / balance to be taxed and not the entire cash payment; ITAT holds that only the net profit is to be added to the total income and not the entire unaccounted sales and under no circumstances the entire amount of cash payments aggregating to Rs.143 crore can be added as it is the same cash which is getting circulated year after year during the entire block period; Notes that the orders of the lower authorities show that the search operation ............. Click here to read and download ITAT order
2) ITAT: Assessee cannot get the benefit of immunity from the penalty merely because there was no specific charge in the penalty notice issued u/s 274 or in the assessment order - ITAT rejects Assessee’s contention that there was no specific charge levied by the AO whether the assessee has “concealed the particulars of income or furnished inaccurate particular of income”; Notes that “the AO has mentioned the specific charge in the penalty order by stating that the assessee has furnished inaccurate particulars of income”; ITAT separately holds that addition/disallowances............. Click here to read and download ITAT order 
Editorial Note: Recently HC held that defect in Show cause notice u/s 274 can be rectified u/s 292B, notice not invalid and ITAT in its order held that once the reason for levying penalty u/s. 271(1)(c) is mentioned in the assessment order, mere mention in the notice "for concealing the particulars of income" or "furnished inaccurate particulars of income" would not cause any prejudice to the assessee.
One may also refer following rulings in favour of Revenue on defect of SCN u/s 274  
3) ITAT: In absence of any incriminating seized material / document, Sec68 additions cannot be sustained – ITAT rejects Revenue submission that additions u/s 153A can be made without having any incriminating material on record; Relies on jurisdictional HC ruling in Veerprabhu Marketing and  distinguishes Revenue’s reliance on HC decisions in Sunny Jacob Jewellers and Dayawanti; ITAT upholds order passed by CIT(A) in holding the additions............. Click here to read and download ITAT order
4) Penalty u/s 271AAB is not mandatory – ITAT: In absence of any undisclosed income revealed by seized materials, income surrendered does not fall within the ambit of undisclosed income as defined in Section 271AAB; ITAT holds that penalty u/s 271AAB is not ipso facto as a result of surrender or disclosure of income during the course of search and seizure, until and unless such surrender of income falls in the definition of........... Click here to read and download ITAT order
5) ITAT: Penalty u/s 271(1)(c) cannot be imposed merely based on addition / disallowances made during the quantum proceedings – ITAT set aside the order passed by lower authorities, directs AO to delete the penalty levied by him u/s 271(1)(c), holds that for the element of income added in the quantum proceedings, there must be some ..........Click here to read and download ITAT order
Expert Column
The “cess” was introduced in the Finance Act, 2004, as “an additional surcharge” and the issue on deductibility of ‘education cess’ while computing income from business or professional has been a debatable one for a while now.
Author Prabhat Agarwal (Chartered Accountant), in his article, refers to the recent HC decision of SESA GOA LIMITED as reported in [TS-5087-HC-2020(BOMBAY)-O] which held that Education Cess and Higher and Secondary Education Cess is allowable as a deduction. The author highlights that HC relied heavily on circular no. F. No.91/58/66-ITJ(19), issued by the Board and intendment deciphered from the omission of word "Cess" on recommendation of Select Committee of Parliament from Income Tax Bill, 1961. Noting that the Revenue has not challenged the above ruling and other similar HC rulings in SC, the author opines that “this can be tricky and risky to conclude that the "Cess" is not in nature of Tax, hence deductible as expenditure in the year of payment”.
Click here to read the article titled, “Deductibility of Cess on Income Tax from the Taxable Income
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