Taxsutra Database Bulletin: Rulings on TDS Proceedings, Sec.68 Addition, Expert's Views on Withholding Tax-Refund & More...
Issue No. 268 / Oct 20th, 2022
Dear Professionals,
We are glad to present to you the 268th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Expert Column
More frequently than not, we come across writ petitions challenging withholding of tax refund by the Revenue after processing of return. The issue is crucial given the mandate for revenue collection and on the other hand, the need for running the businesses smoothly. The legal battles against withholding of refund by the Revenue evolved differently with the insertion of Section 241A to put a check on Revenue's powers to withhold refund.
Mr. K. Senguttuvan (Partner, SAPAA Law Firm), Ms. S. Keerthana (Lead Associate) and Ms. S. Akarshana (Trainee Associate) discuss the development of the legal framework on withholding of refund - from the rigorous Section 143(1D) to a reasonable Section 241A. They analyse various rulings from different High Courts expounding on the necessity and significance of reasons to be recorded for withholding the refund and insufficiency in mere notice without proper reasons. They bring out the peculiarity of Delhi High Court judgment in Cooner Institute and remark that in the absence of compliance as per Section 241A, any blocking of refund would be bad in law and encouraging such practice would defeat the intention of law makers.
Click here to read the article, "Catching Missed Bus for Withholding Refund by Equity - Justifiable?"
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Key Takeaways from Handpicked Rulings
1) SC : Commission paid to non-resident agents not liable to TDS; Affirms HC order - SC dismisses Revenue's SLP against Bombay HC ruling that confirmed ITAT's order deleting the addition under Section 40(i)(ia) on account of TDS-default on the commission of paid to foreign agents; During AY 2010-11, Assessee-Company made payment in the nature of commission to non-resident agents; Revenue noted that payment was in the nature of commission were liable to tax deducted at source and since the Assessee failed to deduct the same, made disallowance of Rs. 5.07 Cr under Section 40(a)(ia) towards payment of commission to foreign agents; Similarly, Revenue also made a disallowance of Rs. 34.85 Cr under Section 40(a)(ia) for failure to deduct tax at source towards payment of demurrage to non-resident buyers of iron ore ……………..Click here to read and download SC order
2) SC: Remands HC order allowing unclaimed benefit of Sec.10(20) as erroneous - SC allows Revenue's SLP setting aside Rajasthan HC ruling which granted benefit under Section 10(20) to the Assessee, with a direction to consider the appeal afresh; Observes that Assessee never claimed the benefit of Section 10(20) and hence, HC erred in granting the benefit without adjudication of appeal on merits; Assessee- a statutory corporation, engaged in providing housing services claimed benefit of exemption under Section 11 and 12 but did not claimed deduction under Section 10(20) of the Act; Revenue denied the exemption under Section 11 and 12 on the ground that the activities carried out by the Assessee are not charitable in nature as per Section 13(8) read with Section 2(15) and accordingly, denied the exemption……………..Click here to read and download SC order
3) SC: Dismisses Revenue's SLP against SBI over taxability of NPA interest - SC dismisses Revenue's SLP against Rajasthan HC ruling wherein it was held that interest on non-performing assets ('NPA') not taxable on accrual basis in view of RBI norms relating to income recognition and assets classification; SC notes that Rajasthan HC relied on Gujarat HC ruling in Shri Mahila Sewa Sahakari wherein it was held that the banking company is not liable to pay tax on NPA interest on accrual basis in view of RBI norms and the provisions of Chapter IIIB of RBI Act have overriding effect qua other enactments including the Income Tax Act; Also noted that the coordinate bench dismissed Revenue's SLP against Shri Mahila Sewa Sahakari ruling on the ground that RBI Guidelines and relevant act restrains banking companies to recognise income from NPA on accrual basis; Accordingly, SC dismisses Revenue's SLP……………..Click here to read and download SC order
4) ITAT: Upholds Sec.68 addition basis Settlement Commission findings in related cases - ITAT dismisses Assessee's appeal, upholds CIT(A) order making addition under Section 68 on account of unexplained loan received by the Assessee from the lender company by relying on findings of Settlement Commission already on record in case of the related group of concerns; Also holds that Assessee was also involved in activity wherein unaccounted money was laundered and re-introduced in the garb of unsecured loan through bank accounts of creditors; For AY 2011-12, Revenue initiated reassessment proceedings in pursuance to search under Section 132 conducted at the premises of Radheshyam Agarwal Group with whom Assessee was connected alleging that Assessee received certain amount of Rs.1 Cr from Karnimata Commerce P. Ltd. (lender company) in form of loan whose genuineness and creditworthiness seems doubtful ………….Click here to download the ITAT order
5) ITAT: Assessee liable for Sec.201 proceedings prior to 2012 amendment, despite tax paid by payee - ITAT dismisses Assessee’s appeal, holds that the Assessee is not eligible to benefits under Section 201(1) as amended via insertion of a proviso vide finance Act, 2012 providing that if it is proved that the payee has paid the tax, then the Assessee who failed to deduct tax at source will not be deemed to be an Assessee in default, since the same is not applicable to the relevant AY 2009-10 and is applicable from July 1, 2012; Further opines the first proviso to Section 201(1) was further amended by Finance Act, 2019, with effect from Sep 1, 2019, to restrict the benefit under proviso to Section 201(1) to the resident payee only, thus upholds the assessment order holding Assessee to be Assessee in default under Section 201(1) for non-deduction of TDS on payment to non-residents under Section 195 and liable to interest under Section 201(1A); Assessee, for AY 2009-10, purchased a land property from four Non Resident Indians for a total consideration of Rs.2 Cr; Revenue noted that Assessee did not deduct tax under Section 195 on the said payment to non-residents, thus initiated proceedings under Section 201(1) holding Assessee to be Assessee in default and levied ……………. Click here to read download ITAT Order
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About Taxsutra Database!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over119115+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.
3) [TS-6446-HC-2021(MADRAS)-O]affirmed in[TS-6012-HC-2021(MADRAS)-O] on writ petition on the ground of availability of alternate remedy, onus is on the assessee to establish the genuinity of the transaction and the source of the investment.
1) ITAT : Services pertaining to leadership skills by non-resident, not FTS - ITAT allows Assessee's appeal and holds that sum paid to non-resident on account of services pertaining to training and developing leadership skills cannot be considered as fees for technical services within the meaning of Section 9(1)(vii) and not chargeable to tax in India; Assessee-company engaged in the business of rendering BPO services; During AY 2016-17, Assessee made payment to a Hong Kong based entity of USD2100 fee for training and developing soft skills and deducted tax at source under Section 195; Subsequently, Assessee filed appeal before CIT(A) under Section 248 and claimed refund of TDS paid on the ground that sum paid to non-resident was not taxable in the hands of non-resident in India as it does not have PE in India; CIT(A) dismissed the appeal on the ground that even though non-resident does not have PE in India but the sum paid by the Assessee pertains to training fees which fall within the ambit of Fee for Technical Service (FTS) and is taxable in India; Before ITAT, Assessee relies on coordinate bench ruling in Lloyds Register and contends that payment of training services does not amount to FTS under the Act; Also relies on ………….. Click here to read and download ITAT Order
2) ITAT: Accrued Interest on NPA for Coop Bank to be taxed in the year of recovery irrespective of accounting method - ITAT partly allows Assessee' appeal, holds that accrued interest on NPAs is to be taxed in the year of recovery irrespective of method of accounting Assessee follows as RBI guidelines does not distinguish between a banking company or cooperative society engaged in banking activities; Assessee is a co-operative society carrying on the business of banking activities including credit and deposit facilities; For AY 2013-14, Revenue made a disallowance of Rs. 6.36 Cr under Section 40(a)(ia) on account of deduction of tax at source on interest paid on various deposits; Revenue also made addition of Rs. 52.20 Lacs on account of accrued interest on NPA on the ground that Assessee follows mercantile system of accounting and the accrued interest on NPA should be taxed in the year under consideration; CIT(A) confirmed the disallowance of Rs.1.72 Cr out of disallowance of Rs.6.36 Cr made by Revenue which includes interest paid on saving bank accounts, compulsory deposits, recurring deposits and FDRs of non-members and also confirmed the addition of Rs.52.20 Lacs on account of accrued interest on NPA on the ground that Assessee is a NBFC and not a banking entity………….Click here to read and download ITAT Order
3) ITAT: Deletes Sec.40(a)(i) disallowance of reinsurance premium ceded to non-resident since not taxable in India - ITAT holds that Cholamandalam MS General Insurance (Assessee-company) is not liable to deduct tax at source under Section 195 on reinsurance premium ceded to non-resident reinsurer, as no income accrued or arose or deemed to accrue or arose in India, accordingly deletes disallowance under Section 40(a)(i); For the AYs 2005-06 to 2010-11, 2013-14 and 2014-15, Revenue disallowed reinsurance premium ceded by Assessee-company (A General Insurance company) to non-resident re-insurers (NRRI) under Section 40(a)(i) for non-deduction of tax under Section 195, holding that income of NRRI accrued/arose in India or deemed to have been accrued or arose in India, which was confirmed by CIT(A) except in cases where specific exclusion of reinsurance premium ceded to NRRIs was provided in DTAA between India and other countries; ITAT rejects Revenue’s reasoning to hold that income accrued/arose in India, explains that except for payment to Indian brokers in a few cases ……………. Click here to read and download ITAT Order
4) HC: Quashes reassessment notice for lack of sanction u/s 151 - HC allows Assessee’s writ petition holds the time to issue notice may have been extended by TOLA but that would not amount to amending the provisions of Section 151; HC set aside the notice issued u/s 148, rejects revenue reliance of TOLA, notes that relaxation Act provisions will not be applicable; Concludes that four years had expired from the end of the relevant assessment year, as provided u/s 151(1), it is only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax…………….. Click here to read and download HC Judgment
5) HC: College providing training to bank officials & incidental services eligible as 'educational institutions' under Sec.10(23C)(vi) - HC allows Assessee's appeal and directs CCIT to consider Assessee's application for exemption under Section 10(23C)(vi); Holds that a training college providing incidental services pertaining to consultancy and assisting banking institutions in appraisal programmes would qualify for exemption under Section 10(23C)(vi) and the said incidental activities would also fall in the category of education; During AY 2014-15, Assessee submitted application seeking exemption under Section 10(23C)(vi); CCIT rejected the said application on the ground that the exemption under Section 10(23C)(vi) could only be granted to an entity engaged solely for educational purpose and Assessee's activities stipulated in memorandum involved assistance services to banking institutions in the matter as appraisal programmes, conducting morale, productivity studies and consultancy services and cannot be said to be meant solely for educational purpose; ITAT upheld the order of CCIT; Before HC, Assessee contends that an approval was sought from DDIT (Exemption) in the year 2008 to amend memorandum of association and the copy of the same was also furnished but no approval is granted till date; Also contends that its activities meant solely for education purposes and not for the purpose of profit and any surplus results incidental from activity carried on by it will not cease to be one existing solely for educational purpose; While Revenue contends that the if the objects clause were deleted in the amended memorandum of association, the same would have been a part of application seeking exemption under Section 10(23C)(vi) and accordingly. ………….. Click here to read and download HC Judgment
6) HC : Quashes reassessment initiated beyond 4 years based on audit objection as pre-condition not satisfied - HC allows Assessee's writ petition, holds that statutory pre-condition stipulated in proviso to Section 147 has to be complied before initiating reassessment proceedings beyond the period of 4 years from the end of the relevant AY and the burden cast upon the Revenue by virtue of the said proviso must be first discharged before availing benefit of the Explanation to Section 147; Assessee entered into a scheme of amalgamation duly approved by court and accordingly merged the assets and liabilities including method of accounting; During AY 2012-13, Assessee filed revised return declaring loss of Rs. 30.6 Cr under regular provisions and after making upward and downward adjustment set forth in Section 115JB including brought forward loss of Rs.30.65 Cr and depreciation of Rs.18.05 Cr computed the adjusted book profit as nil for the purpose of MAT provisions; Revenue rejected the income declared by Assesee and the methodology adopted for computation of book profit and also added expenses attributable to exempt income which lead to increase in taxable book profit for the purpose of Section 115JB;…………Observes that there is no dispute with regard to disclosure of all material including computation of tax under provisions of MAT made by Assessee during the original assessment and there is no allegation in the reasons itself to the effect that there is any incomplete disclosure or false statement made at the time of assessment which justify the assumption of jursidction beyond 4 years; Remarked that "the reasons proceed on the basis that the methodology for computation is errorenous which premise, as noticed earlier, does not appear to be correct as the financials disclose the availability of depreciation. In such circumstances, the assumption of jurisdiction under Section 147 is held to be bad in law"; Also observes that reassessment proceedings initiated by Revenue merely on the basis of audit objection and without satisfying the requirement of independent 'reason to believe' that income has escaped assessment is bad in law; Accordingly, allows Assessee's Writ Petition and quashed reassessment proceedings….……….. Click here to read and download HC Judgment
7)ITAT: Assessment made by relying on Sec.132(4) statements, on standalone basis, not sustainable - ITAT holds that statements recorded during the course of search cannot be used on a standalone basis to make additions in the post-search assessments; ITAT deletes additions made in the post-search assessments for AYs 2008-09 to 2010-11 and 2012-13 as an addition made on ad hoc basis where the assessment had attained finality and were not abated by virtue of Section 153A; Finds that the additions were not based on any incriminating material found during the course of search proceedings, but only on the statements of key persons recorded during the course of search; Remits the matter pertaining to AYs 2011-12, 2013-14 and 2014-15 back to Revenue with a direction to decide the matter afresh after considering the additional evidences admitted in the present case; Assessee-Individual, a proprietor and a director of few companies ………….. 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 over118680+ 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 Search & Seizure, Rulings on bogus loans, post-search assessment & more...
Issue No. 266 / Aug 26th, 2022
Dear Professionals,
We are glad to present to you the 266th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Expert Column
Mr. S. Ramanujam (Chartered Accountant) in this article analyses the recent Madras HC ruling on various questions pertaining to search and seizure. The author is of the view that with searches becoming frequent nowadays and covered extensively by the media, it is pertinent that the taxpayers are aware of their rights. He shares his views on various aspects of the judgment that upheld the constitutionality of retrospective amendments made in the search and seizure regime. He also throws light on observations made by the Court while remanding the matter back to the Revenue on validity of search warrant, purpose of special audit etc.
1) ITAT: Non-existence of lenders, clear indication of loan being prima facie bogus - ITAT allows Revenue's appeal, sets aside CIT(A) order and remands back the issue to AO to identity, creditworthiness and genuineness of the transaction; ITAT notes that the persons who have given loan are not present at their address which clearly shows the lack of genuineness of the transactions and receipt of the amount in their bank accounts immediately before giving the loans further cast doubt of the creditworthiness; Before the ITAT, Revenue submitted that this is a classic case of routing of unaccounted money in circuitous manner and merely a transaction having been routed through a banking channel does not prove that the transaction is sacrosanct; The Unavailability of the parties is a clear sign of the transactions not being genuine; ITAT observes that CIT(A) has observed ………………………..Click here to read download ITAT Order
2) ITAT: The word "assess" in section 153A of the Act is relatable to abated proceedings (i.e., those pending on the date of search) and the word "reassess" to completed assessment proceedings - ITAT holds that a completed assessments can be interfered by the AO while making the assessment u/s 153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment; ITAT further holds that in so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment u/s 153A merges into one and only………………………..Click here to read download ITAT Order
3) HC: Admits Revenue's appeal on whether royalty paid for minerals is 'tax' for Sec.43B - Bombay HC admits Revenue's appeal on whether royalty payable on mineral extraction is in the nature of tax for the purpose of Section 43B of the Act; Observes that the issue pertaining to nature of royalty is pending for reference to SC bench of nine judges, thus, the Revenue's appeal requires admission; Assessee-Company, engaged in the business of mining, processing and sale of mineral ore was subjected to disallowance of the unpaid amount of royalty by invoking Section 43B and treating royalty payment as "Tax" falling within the scope of the said section; CIT(A) upheld the disallowance and relied on Shanti Saroop ruling wherein it was held that royalty is not a payment of the nature covered within the meaning of Section 43B and observed that royalty is more akin to rent or compensation payable to an owner by the occupier or lessee of land for its use or exploitation of the resources; ITAT relied on SC ruling in Kesoram Industries wherein it was held that royalty is not tax and observed that royalty could not be disallowed under Section 43B of the Act.………………………. Click here to read and download HC admission copy
4) HC : Set aside Sec.148A(d) order, directs Revenue to reconsider Assessee's reply - HC sets aside order under Section 148A(d) and directs Revenue to reconsider the reply of Assessee in pursuance to show cause notice under Section 148A(b) and material placed before it; Also directs Revenue to pass appropriate order under Section 148A(d) by assigning valid reasons to show that it is fit case to issue or not to issue notice under Section 148; Holds that order under Section 148(d) cannot be passed in a mechanical manner without appreciating material available on record and reply of the Assessee; show cause notice was served upon to the Assessee alleging income escaped assessment on ground that alleged bogus transactions with a company were not disclosed in the return of income; Assessee filed reply and explained the nature of alleged transactions and contended that the alleged transactions were duly reflected in return of income; Revenue rejected the objections of the Assessee and held that the case is fit for issuance of notice under Section 148 of the Act, accordingly passed order under Section 148A(d); Before HC, Assessee contended that the order under Section 148A(d) is passed in a mechanical manner without application of mind; Also contended that Revenue did not considered the material placed before it or the averments made in reply to show cause notice and order under Section 148A(d) is passed without assigning any appropriate reason; While, Revenue contended that order under Section 148A(d) is passed after considering the material placed before it by the Assessee and the present case is only at the stage of initation of enquiry as to whether income has escaped assessment ………………………..Click here to read download HC Order
5) HC : Sets aside Sec.148A(d) order passed without considering objections; Directs Revenue to apply its mind - Gujarat HC sets aside the order under Section 148A(d) and directs Revenue to apply its mind and pass an appropriate order dealing with all the objections raised by the Assessee in pursuance to show cause notice under Section 148A(b) of the Act; Holds that there is an obligation cast upon the Revenue in accordance with Section 148A(d) to consider the case not only on the basis available of the materials on record, but also the reply of the Assessee; Assessee-Individual was served with a show cause notice for AY 2018-19 alleging escapement of income on account of non-disclosure of transactions of Rs.180 Cr with respect to accounts in Social Cooperative Bank; Assessee denied the allegation on the ground that one bank account in which transaction of Rs.66 Cr was carried belong to the HUF, the alleged transactions carried out cannot be assessed in the hands of the Assessee in his individual capacity and the other bank account in which transaction of Rs.101 Cr was related to the business of the Assessee carried out in its proprietary concern "Shree Trading Co.' and the same was reflected in the books of the proprietary concern along with the return of income; Revenue rejected Assessee's submission on the ground that requisite documentary evidences were not submitted and accordingly passed order under Section 148A(d) and considered alleged transactions being unexplained and ………………………..Click here to read download HC Order
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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 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:
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Mr. K. Senguttuvan (Partner, SAPAA Law Firm), Ms. S. Keerthana (Lead Associate) and Ms. S. Akarshana (Trainee Associate) discuss the development of the legal framework on withholding of refund - from the rigorous Section 143(1D) to a reasonable Section 241A. They analyse various rulings from different High Courts expounding on the necessity and significance of reasons to be recorded for withholding the refund and insufficiency in mere notice without proper reasons. They bring out the peculiarity of Delhi High Court judgment in Cooner Institute and remark that in the absence of compliance as per Section 241A, any blocking of refund would be bad in law and encouraging such practice would defeat the intention of law makers. 
Mr. S. Ramanujam (Chartered Accountant) in this article analyses the recent 
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.