Taxsutra Database Bulletin: Expert's View on Statutory Approvals; Rulings on Cash Deposit, Prosecution & More!
Issue No. 265 / August 08th, 2022
Dear Professionals,
We are glad to present to you the 265th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
Journals Current Status
ITR Vol 444 PART 5
Dated - 27th June 2022
ITR Trib Vol 97 Issue 1
Dated - 04th July 2022
CTR Vol. 326 Issue 24
Dated - 17th June 2022
DTR Vol 214 Issue 119
Dated - 28th June 2022
TAXMAN Vol. 286 Part 6
Dated - 11th June 2022
ITD VOL.194 Issue 8
Dated - 22nd June 2022
TTJ VOL. 218 Issue 25
Dated - 21st June 2022
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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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About Taxsutra Database!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over118600+ 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:
a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
c) Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
d)Judicial “forward & backward reference”
The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.
Taxsutra Database Bulletin: Expert's View on Reassessment; Rulings on TDS, Capital Gains, DRP Procedure & More...
Issue No. 264 / July 21st, 2022
Dear Professionals,
We are glad to present to you the 264th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
Journals Current Status
ITR Vol 444 PART 2
Dated - 06th June 2022
ITR (Trib) Vol 96 Issue 2
Dated - 30th May 2022
CTR Vol. 326 Issue 21
Dated - 27th May 2022
DTR Vol 212 Issue 80
Dated - 04th May 2022
Taxman Vol. 286 Part 2
Dated - 14th May 2022
ITD Vol.194 Issue 3
Dated - 18th May 2022
TTJ Vol. 217 Issue 19
Dated - 10th May 2022
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Expert Column
The Supreme Court’s balancing act in the reassessment controversy has garnered mixed reactions and invocation of Article 142 to render ‘complete justice’ has resulted in saving the reassessment notices issued under the erstwhile regime.
Mr. Prakash Sinha (Partner, Prakash Sachin & Co., Chartered Accountants) in this article analyses the SC ruling and brings out the key takeaways. He is of the view that the ruling is a watershed moment in the tax jurisprudence as he briefly discusses some of the landmark rulings in the context of Article 142. However, the author then opines that the judgment is likely to confuse the minds of both the Assessees and the Revenue as he refers to the letter addressed to CBDT by Association of Income Tax Gazetted Officers for seeking clarification as a mere tip of an iceberg.
The author underscores various issues of debate, including whether treating the 148 notices post Apr 1, 2021 as the notice issued 148A(b) would save the reassessment for AY 2013-14 and AY 2014-15, providing information to assessees within the time frame of 30 days etc. He analyses the pending reassessment matters and classifies them into five categories, and asserts that all the cases need to be separately analyzed by the Revenue in terms of the amended provisions and the limitation applicable and then only proceed towards 148A(d). He also highlights the challenge involved from the perspective of ITBA Portal in cases where Section 148 notices were issued and finds the need for some modifications in the Portal to overcome the technical issues.
Click here to read the analytical article, “SC Ruling on Reassessment – A Beginning of Another Controversy?"
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Key Takeaways from Handpicked Rulings
1) ITAT: Municipal tax challan sufficient evidence for claiming deduction for construction cost - ITAT allows Assessee’s appeal, sets aside order denying indexed cost of construction for failure to produce evidence while computing long term capital gains; For the AY 2013-14, Assessee-Individual offered long term capital gains of Rs.3.53 lakhs from sale of land, after demolishing the building on the said land; During the reassessment proceedings, Revenue denied deduction for indexed cost of construction since the Assessee could not furnish any evidence for construction and also disallowed deduction for cost of demolition of building from scrap sale proceeds and accordingly recomputed capital gains at Rs.78.90 lakhs which was confirmed by CIT(A); ITAT observes that Assessee constructed the building in the year 1994-95 and filed details of municipal taxes paid from the year 2003-04 to 2011-12, thus opines that “there is no dispute that the assessee had constructed the building and paid the municipal taxes thereon. The payments of municipal taxes support the existence of the building in the said site..”; Notes that Revenue denied deduction for cost of construction merely because the Assessee could not furnish evidences, states that ………………..Click here to read and download ITAT Order
2) ITAT: Share transfer taxable in India where Assessee's residential status not in dispute - ITAT dismisses Assessee’s appeal, holds capital gains on sale of shares of a Dubai-based company as taxable in India since it was established that Assessee was a resident for the year under consideration; Rejects Assessee's reliance on SC ruling in P.V.A.L. Kulandagan Chettiar since it was a case of dual residency where the Assessee in the present case was found to be tax-resident of India only; Asesseee-Individual was subjected to assessment whereby Revenue made an addition of Rs.2.48 Cr. as long term capital gains which was confirmed by the CIT(A), against which Assessee preferred the instant appeal; ITAT finds Assessee was employed in Muscat for 20 years during which he made investment of 1,62,000 Dirhams in the shares of a company incorporated in Dubai and was one of the promoters of the company; Also notes that the Assessee transferred the shares……….. Click here to read and download ITAT Order
3) ITAT: Interest paid on delayed payment of TDS under Sec. 201(1A) compensatory in nature, thus allowable - ITAT allows Assessee’s appeal, holds interest paid on delayed payment of TDS under section 201(1A) is compensatory in nature and allowable as deduction; Assessee-Company made a fresh claim for deduction of interest paid on late payment of TDS, during the assessment proceedings for AY 2015-16 which was disallowed by the Revenue on the ground that interest paid under section 201(1A) is penal in nature; On appeal, CIT(A) allowed the fresh claim made by the assessee; however, disallowed the claim for deduction on merits by relying upon the decision in Ferro Alloys Corporation Ltd; ITAT relying upon the coordinate bench ruling in STUP Consultants P. Ltd. observes that TDS deducted on behalf of the third party and the interest charged on failure to remit the same within the stipulated due date is only compensatory in nature and allowable as deduction; ITAT also distinguishes the decision of Ferro Alloys Corporation Ltd. relied on by the CIT(A) while denying the claim of assessee on merits and observes that ………………Click here to read and download ITAT Order
4) ITAT: Uphold CIT(A)’s rejecting books as incorrect where Assessee followed hybrid method accounting - ITAT dismisses assessee’s appeal, upholds CIT(A)’s order rejecting Assessee’s books of accounts and estimating profit @ 8% of the gross receipts in terms of Section 44AD; Assessee-Individual was subjected to assessment for A.Y. 2015-16, whereby Revenue made addition of Rs. 2,54,71,701/- being the difference of income as per Form 26AS and income shown by the Assessee on the ground that the same was not offered to tax even though it was accrued to the Assessee, and despite Assessee following mercantile basis of accounting; On appeal, CIT(A) observed that the Assessee booked certain income on cash basis while in some instances on mercantile basis and Income Tax Act did not permit hybrid system of accounting and thus rejected the books of accounts maintained by the Assessee holding them to be incorrect/incomplete; CIT(A) also worked out the income by applying 8% net profit of gross receipts…………….Click here to read and download ITAT Order
5) HC: Quashes assessment order as time barred; Extension of timelines due to Covid inapplicable to Sec.144C - HC allows Assessee’s writ, sets aside assessment order passed under Section 143(3) read with Section 144C(1) is barred by limitation and thus liable to be quashed; For AY 2018-19, Revenue passed draft assessment order under Section 143(3) read with Section 144C on Apr 19, 2021; However, Assessee-Company (tax resident of the Netherlands), vide letter dt. May 17, 2021, informed that it would pursue normal appellate channel instead of filing objections before the DRP and accordingly requested Revenue to pass the final assessment order; The final assessment order was passed by Revenue on Sep 29, 2021; HC observes that as per Section 144C, Assessee has two options when the assessee receives draft assessment order which is prejudicial to the interest of such Assessee: (i) file acceptance to variations proposed or (ii) file objections before DRP, within 30 days from receipt of draft assessment order, notes that where the Revenue receives acceptance of variance or does not receive objections within 30 days, the final order shall be passed on the basis of the draft order; Observes that in the present case, Assessee’s communication informing Revenue to pass the final order was received by the Revenue on May 17, 2021 and accordingly, the time limit prescribed under Section 144C(4) (one month from the end of the month in which acceptance is received or the period of filing of objections under Section 144C(2) expires) would expire on Jun 30, 2021; Rejects Revenue’s contention that Assessee’s communication dt. May 15, was not uploaded on ITBA platform and should be ignored, remarks that even if the contention is accepted, “still, draft order having been received by petitioner on 19.4.2021, thirty day period provided under ……………….Click here to read and download HC judgment
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About Taxsutra Database!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over117825+ 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:
a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
c) Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
d)Judicial “forward & backward reference”
The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.
TDS on Benefit or Perquisite was introduced through Section 194R by Finance Act, 2022 with effect from 1st July 2022. Recently, CBDT released ‘Guidelines for the removal of difficulties in the Practical Implementation of Section 194R’;
Mr. Ishu Garg (Intern, SGPM & Associates) points out that Section 194R does not cover the perquisites covered under the head of salary income u/s 17(2) and its scope is limited to the perks or benefits provided in lieu of business/ profession carried on by the recipient; In light of the CBDT guidelines, the author remarks that, “the clarification regarding out of pocket expenses is something that would need an extra attention by the taxpayer.”; Highlights that the term “any benefit or perquisite, whether convertible into money or not” widens the scope of the provisions and covers diverse nature of transactions such as medicine samples received by medical practitioners or products retained by social media influencers; The author concludes that, “CBDT is quiet on time in bringing these guidelines to reduce the challenges to be faced by the Taxpayers”;
Click here to read the article titled "Understanding Section 194R “TDS on Benefit or Perquisite"
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Key Takeaways from Handpicked Rulings
1) HC : Holds Benami orders, passed timely, communicated with delay as valid; Sets aside Single Judge’s order – HC Division Bench allows writ appeal, holds the orders were passed by the Benami Adjudicating Authority were within the time limit as prescribed under section 26(7) and the dates on which the certified copies were made ready and booked for despatch cannot be construed as the dates of passing of the orders under Section 26(3) was strictly within limitation period; Single Judge had allowed the writ petitions by holding the orders to be time-barred on the ground that the orders passed will take effect only from the date of communication; HC also holds that the Single Judge was not correct in entertaining the writ petitions since there was an efficacious ………….Click here to read and download HC Judgment
2) HC: Offences compoundable by DGIT even where not normally compoundable under the Guidelines - HC sets aside the DGIT’s order rejecting the compounding application for providing false information and non-cooperation during investigation; Assessee was prosecuted under Section 276C and 277 for failure to file return of income and not disclosing investment in the form of bank balance in a foreign bank account; Earlier HC had set aside DGIT’s order with a direction to dispose of the compounding application within 60 days by granting Assessee the liberty to file compounding application within 30 days; Pursuant to HC’s directions, Assessee filed a fresh application which also got rejected against which the Assessee preferred a contempt petition for non-compliance of HC’s directions; HC dismissed the contempt petition but set aside the rejection order with a direction to consider factors such as age and social status of the Assessee in the light of liberalized policy in terms of CBDT Clarification dated 14.06.2019; However, Assessee’s compounding application was again rejected; HC observes, “Guidelines issued for compounding offences ……….Click here to read and download HC Judgment
3) HC: Rejects writ against revisionary order for availability of appellate remedy before ITAT - HC dismisses Assessee’s writ petition challenging revisionary order, holds appropriate remedy would be to prefer an appeal before ITAT; Assessee, a UK-based company, was subjected to revision under Section 263 on MAT computation while Assessee’s appeal was pending before CIT(A) against the taxability of market and support services; HC observes that the power of revisionary authority extends to such matters that are not considered and decided in an appeal and that in the instant case the appeal before the CIT(A) was yet to be decided, thus, holds that there is no restriction on revisionary authority to pass an order; Opines that invocation of Section 263 by the CIT cannot be said to be without jurisdiction merely because the intimation of DIN in the order passed under Section 263 was one day after the order was passed; Refers to …..……..Click here to read and download HC Judgment
4) ITAT: Sec.40A(3) disallowance not sustainable while processing ITR since cash payment justified in TAR - ITAT directs deletion of disallowance made u/s 40A(3) in the intimation u/s 143(1); Assessee-Firm, was subjected to disallowance of Rs.1.71 Lacs while processing of return for cash payments made in excess of Rs.20,000/- in violation of Rule 6DD; ITAT notes that the Assessee in its tax audit report had given the details of cash payments in response to question and based on this information reflected in form No.3CD by the tax auditor, the CPC while processing the return had directly resorted to make disallowance u/s 40A(3); The tax auditor also gave the reason that the assessee was forced to make the payment in cash and the transaction had happened..……….. Click here to read and download ITAT Order
5) ITAT: Sec.69A addition & consequential penalty not sustainable where source of loan known to Revenue - ITAT upholds deletion of Section 69A addition, holds that the receipt of cash loan and source which is already available on record, it is not understandable how the same become undisclosed income in the hands of the assessee, as source of the same, is already within the knowledge of the IT Department; ITAT further notes that the AO has on the one hand added cash loan alleged to receipt by the assessee as unexplained cash credit as income and on the other hand, also levied penalty u/s 271D of the Act in contravention of provision of section 269SS and the CIT(A).…………..Click here to read and download ITAT Order
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About Taxsutra Database!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over117185+ 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:
a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
c) Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
d) Judicial “forward & backward reference”
The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.
1) ITAT: Upholds CIT(E) order rejecting Sec.12A; Onus to prove fulfilment of statutory requirements on Assessee - ITAT upholds CIT(E) order, rejecting application for grant of registration u/s 12A on four grounds, firstly that the assessee’s trust deed does not have irrevocability clause, secondly that the trust deed of the Assessee also does not provide that in case of winding up/dissolution of the Assessee, its funds /property will be transferred to another charitable entity, thirdly that the trust deed of the assessee does not have a clause that the beneficiaries are a section of public and not specific individuals, and fourthly that the assessee will use its funds/property for its objects; Notes that the primary condition for grant of registration u/s 12A is that the assessee is a ……………..Click here to read and download ITAT Order
2) HC: Remands Tata Teleservices' stay application over deposit of less than 20% of demand - HC holds that the requirement of payment of twenty percent (20%) of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases; The said pre-condition of deposit of twenty percent of the demand can be relaxed in appropriate cases; Takes note of Office Memorandum dt. 29th February, 2016 and observes that where addition on the same issue has been deleted by the appellate authorities in earlier years or where the decision of the SC or jurisdictional HC is in favour of the assessee, stay at lower deposit can be granted………….Click here to read and download HC Judgment
3) HC: Dismisses cooperative society's challenge against Sec.148 notice; Holds no change of opinion since assessment records not examined - HC dismisses writ petition by a co-operative society challenging reassessment proceeding as mere change of opinion, permits the Revenue to continue the proceeding by holding that “even in the case of existing material, if no conscious attempt has been made by the AO, it would at the most tantamount to mistake in not considering the relevant point or proposition and it would not certainly not fall in category of “change of opinion.”; Assessee filed its return of income for AY 2015-16 declaring NIL income after claiming deduction under Section 80P; Revenue issued notice under Section 148 on the ground that Assessee claimed deduction on interest received on FDR’s from the cooperative banks and nationalized banks, which was inadmissible under Section 80P; HC observes that the Revenue recorded two reasons: (i) interest on FDRs from Cooperative Banks and Nationalised Bank, for which deduction under Section 80P is inadmissible and (ii) interest other than Cooperative Societies and the same is not admissible for deduction under Section 80P; Opines that Revenue has rightly formed opinion that the interest derived from the surplus funds invested by the Assessee in the nature of FDRs other than the Cooperative Societies i.e. other Cooperative Banks and Nationalized Bank, will certainly not fall in the category to be entitled to claim the deductions under Section 80P(2)(i) and Section 80P(2)(d) and thus have escaped assessment, remarks that..………..Click here to read and download HC Judgment
4) HC: Interest on compensation awarded by MACT not taxable, de hors amendment to Section 145A(b) - HC holds interest awarded by the Motor Accidents Claim Tribunal (MACT) as not taxable under the Income-tax Act, observes that the compensation is on the principle of restitution to place the claimant in the same position in which he would be, if the loss of life or injury was not suffered; Also observes that “the amendment in Section 145A(b) only creates a deeming fiction as to the year of taxability of the interest on compensation. It does not create a deeming fiction as to the taxability of the interest on compensation. Even after the insertion of Section 145A(b), the interest on compensation under the Motor Vehicles Act which is exempt does not become taxable by operation of Section 145A(b)”; Explains that the compensation received on compulsory acquisition of land is chargeable under capital gains, thus the issue over taxability of interest thereunder is limited to the extent of whether it is taxable as interest income or as a part of compensation, whereas under the Motor Vehicles Act, the compensation itself is exempt; Thus, remarks that “nature of interest, therefore, would assume significance and cannot be given the same treatment as interest on compensation under the Land Acquisition Act and be taxed by operation of Section 145A(b)”………..Click here to read and download HC Judgment
5) ITAT: Co-operative banks are first cooperative society, entitled to Sec.80P deduction- ITAT holds that interest earned from investment by an assessee a Co-operative Society from the co-operative bank, it does not come under the consideration of the income from other sources, hence interest is eligible for deduction u/s.80P(2)…………….Click here to read and download ITAT Order
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About Taxsutra Database!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over117185+ 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:
a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
c) Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
d)Judicial “forward & backward reference”
The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.
Taxsutra Database Bulletin : Expert's views on reassessment controversy; Rulings on Sec.80P deduction, FTC & More...
Issue No. 261 / May 20th, 2022
Dear Professionals,
We are glad to present to you the 261st 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.
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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About Taxsutra Database!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over116910+ 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:
a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;
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d) Judicial “forward & backward reference”
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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 
kash Sinha (Partner, Prakash Sachin & Co., Chartered Accountants) in this article analyses the SC ruling and brings out the key takeaways. He is of the view that the ruling is a watershed moment in the tax jurisprudence as he briefly discusses some of the landmark rulings in the context of Article 142. However, the author then opines that the judgment is likely to confuse the minds of both the Assessees and the Revenue as he refers to the letter addressed to CBDT by Association of Income Tax Gazetted Officers for seeking clarification as a mere tip of an iceberg.
Mr. Ishu Garg (Intern, SGPM & Associates) points out that Section 194R does not cover the perquisites covered under the head of salary income u/s 17(2) and its scope is limited to the perks or benefits provided in lieu of business/ profession carried on by the recipient; In light of the CBDT guidelines, the author remarks that, “the clarification regarding out of pocket expenses is something that would need an extra attention by the taxpayer.”; Highlights that the term “any benefit or perquisite, whether convertible into money or not” widens the scope of the provisions and covers diverse nature of transactions such as medicine samples received by medical practitioners or products retained by social media influencers; The author concludes that, “CBDT is quiet on time in bringing these guidelines to reduce the challenges to be faced by the Taxpayers”;
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.
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.