Wednesday, January 26, 2011

ITR : Volume 330 : Part 5 Issue dated 31-01-2011

INCOME TAX REPORTS (ITR)

Volume 330 : Part 5 (Issue dated 31-1-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Advance tax --Interest--Non-resident--Entire income liable to deduction of tax at source--Assessee not liable for advance tax--Cannot be charged interest for failure to pay advance tax--Income-tax Act, 1961, ss. 201, 209, 234B-- Director of Income-tax v. Jacabs Civil Incorporated (Delhi) . . . 578

Assessment --Assessment on agreed basis--Assessee cannot appeal against such order--Income-tax Act, 1961-- CIT v. Vamadevan Bhanu (Ker) . . . 559

Business expenditure --Disallowance--Excessive and unreasonable payments--Addition for purchases and sales made from sister concern--Finding by Commissioner (Appeals) as well as Tribunal as to genuineness of valuation in transaction between sister concerns not perverse--Findings of fact--Income-tax Act, 1961, s. 40A(2)(b)-- CIT v. Jyoti Industries (P&H) . . . 573

----Disallowance--Excessive or unreasonable payments--Trade discount--Discount allowed to sister concern--Assessee claiming 11 per cent. on ground of bulk sales--Assessing Officer allowing 3 per cent., Commissioner (Appeals) enhancing to 8 per cent. while Tribunal reducing to 5 per cent.--Assessee allowed 11 per cent. in earlier years--Assessee entitled to 11 per cent.--Trade discount not an expenditure--Section 40A(2)(b) does not apply--Income-tax Act, 1961, s. 40A(2)(b)-- United Exports v. CIT (Delhi) . . . 549

Capital gains --Valuation of capital asset--Reference to Departmental Valuation Officer--Condition precedent--Opinion of Assessing Officer that value claimed is less than fair market value--Income-tax Act, 1961, s. 55A-- CIT v. Umedbhai International P. Ltd. (Cal) . . . 506

Cash credits --Burden of proof--Initial burden on assessee to prove identity of creditors--Burden then shifts to Revenue to prove credits were not genuine--Identity of applicants for shares and their PAN numbers furnished--Amounts received through account payee cheques--Inability to find a few applicants--Not sufficient to invoke section 68--Income-tax Act, 1961, s. 68-- CIT v. Winstral Petrochemicals P. Ltd . (Delhi) . . . 603

Circulars --Scope of--Income-tax Act, 1961, s. 119-- Deputy CIT v. Sunita Finlease Ltd. (Chhattisgarh) . . . 491

Deductions --Law applicable--Section 14A prohibiting deduction of expenses relating to non-taxable income--Circular of CBDT dated 23-7-2001 stating that concluded assessments could not be reopened for purposes of section 14A--Meaning of "concluded assessment"--Assessment which could be modified by higher authority not a concluded assessment till expiry of time-limit for such modification--Assessment order remanded for modification in appeal--Subsequent revision of order--Permissible--Income-tax Act, 1961, s. 14A--CBDT Circular 11 dated 23-7-2001 (250 ITR (St.) 84)-- Catholic Syrian Bank Ltd . v. CIT (Ker) . . . 556

Deduction of tax at source --Salary--Effect of sub-section (3) of section 192--Default in deduction can be made up during financial year--Income-tax Act, 1961, ss. 192, 201-- CIT v. Enron Expat Services Inc. (Uttarakhand) . . . 496

Estimate of income --Gross profit--Assessee failing to produce books of account--Assessing Officer assessing income at 5 per cent. of gross receipts--Tribunal modifying to 4 per cent. of gross receipts--Justified--Assessment for previous year a guide not binding for subsequent years--Income-tax Act, 1961-- Arvind Baloni v. ITAT  (P&H) . . . 589

Income-tax --General principles--Rule of consistency--Loss on sale of shares treated as business loss though stock of shares shown as investment--Assessment after enquiry--Different view not to be taken for subsequent year--Income-tax Act, 1961-- CIT v. Darius Pandole (Bom) . . . 485

Interest --Interest on excess refund--Provision not applicable prior to assessment year 2004-05--Income-tax Act, 1961, s. 234D-- Director of Income-tax v. Jacabs Civil Incorporated (Delhi) . . . 578

Interest on borrowed capital --Disallowance on ground that a part of amount given to subsidiary company--Revenue failing to establish that loan given for only personal purposes--Finding that interest not to be disallowed--Justified--Income-tax Act, 1961, ss. 36(1)(iii), 37-- CIT v. Dalmia Cement Bharat Ltd. (Delhi) . . . 595

Penalty --Assessee claiming revenue expenditure--Penalty imposed holding expenditure capital--Finding by Commissioner (Appeals) as well as Tribunal that issue debatable--Penalty not attracted--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Krishna Maruti Ltd. (Delhi) . . . 547

----Concealment of income--Assessee computing pre-operative expenses after deducting interest and showing in balance-sheet filed along with return of income--Assessing Officer holding that interest cannot be adjusted against pre-operative expenses--Not a case of concealment of income--Penalty cannot be imposed--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Mushashi Autoparts India P. Ltd. (Delhi) . . . 545

Reassessment --Unexplained money--Presumption that represents income of year in which found--Voluntary disclosure under 1997 Scheme of assets stated to be acquired in 1985-86 and 1986-87--Declaration becoming invalid for failure to pay tax--Reassessment for assessment year 1998-99 on basis of disclosure--Permissible--Income-tax Act, 1961, ss. 69A, 147, 148--Finance Act, 1997, ss 68, 71, 72-- CIT v. Prem Pal  (P&H) . . . 499

Recovery of tax --Interest on delayed payment of tax--Waiver of interest--Conditions precedent--Conditions laid down in section 220(2A) are cumulative--Payment of interest whether would cause genuine hardship to assessee--Income of relevant period to be taken into account--Past liabilities not relevant--Finding that payment of interest would not cause genuine hardship--Refusal to waive interest--Justified--Income-tax Act, 1961, s. 220(2A)-- P. Sudhakaran v. Deputy CIT (Ker) . . . 488

----Interest--Waiver of interest--Law applicable--Section 220(2A) inserted with effect from 1-10-1984--Not applicable where assessments completed and demand notices issued before 1-10-1984--Writ petition challenging validity of provision--Failure to pay tax under disputed provision--Presumption of validity of provision--Provision subsequently held valid by Supreme Court--Levy of interest justified--Income-tax Act, 1961, s. 220(2A)-- Prakash Tubes Ltd. v. Union of India (Delhi) . . . 561

Rectification of mistakes --Loss--Set-off--Debatable issue not mistake apparent from record--Wrong allowance of set off of losses could not be rectified under section 154--Income-tax Act, 1961, ss. 143(3), 154, 158BC-- CIT v. Soora Subramanian  (Mad) . . . 591

Revision --Limitation--Order of assessment subject of rectification--Notice for revision on issue not affected by rectification and referring to order of assessment--Limitation to be reckoned from date of assessment order, not date of rectification--Income-tax Act, 1961, ss. 143, 154, 263-- CIT v. Shriram Engineering Construction Co. Ltd . (Mad) . . . 568

Scrutiny of cases --Circular--Circular prescribing time limit of three months for scrutiny for returns filed in financial year 2004-05--Circular binding on Revenue authorities--CBDT Instruction No. 9 of 2004, dated September 20, 2004--Income-tax Act, 1961, s. 119-- Deputy CIT v. Sunita Finlease Ltd. (Chhattisgarh) . . . 491

Search and seizure --Block assessment--Undisclosed income--Definition--No valid return of income filed by assessee for any of the years of block period--Response to notice issued under section 131 not disclosure for the purpose of Act--Onus on assessee to disclose undisclosed income by way of return before commencement of search--Block assessment on materials seized on search valid--Matter remanded--Income-tax Act, 1961, ss. 132, 158BB, 158BC, 158BD-- CIT v. Sivabala Devi (Mad) . . . 510

----Block assessment--Warrant of authorisation issued in joint names of husband and wife--Individual assessment on wife alone--Not valid--Income-tax Act, 1961, s. 158BC-- CIT v. Smt. Vandana Verma (All) . . . 533

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Finance Act, 1997 :

Ss. 68, 71, 72 --Reassessment--Unexplained money--Presumption that represents income of year in which found--Voluntary disclosure under 1997 Scheme of assets stated to be acquired in 1985-86 and 1986-87--Declaration becoming invalid for failure to pay tax--Reassessment for assessment year 1998-99 on basis of disclosure--Permissible-- CIT v. Prem Pal (P&H) . . . 499

Income-tax Act, 1961 :

S. 14A --Deductions--Law applicable--Section 14A prohibiting deduction of expenses relating to non-taxable income--Circular of CBDT dated 23-7-2001 stating that concluded assessments could not be reopened for purposes of section 14A--Meaning of "concluded assessment"--Assessment which could be modified by higher authority not a concluded assessment till expiry of time-limit for such modification--Assessment order remanded for modification in appeal--Subsequent revision of order--Permissible--CBDT Circular 11 dated 23-7-2001 (250 ITR (St.) 84)-- Catholic Syrian Bank Ltd . v. CIT (Ker) . . . 556

S. 36(1)(iii) --Interest on borrowed capital--Disallowance on ground that a part of amount given to subsidiary company--Revenue failing to establish that loan given for only personal purposes--Finding that interest not to be disallowed--Justified-- CIT v. Dalmia Cement Bharat Ltd. (Delhi) . . . 595

S. 37 --Interest on borrowed capital--Disallowance on ground that a part of amount given to subsidiary company--Revenue failing to establish that loan given for only personal purposes--Finding that interest not to be disallowed--Justified-- CIT v. Dalmia Cement Bharat Ltd. (Delhi) . . . 595

S. 40A(2)(b) --Business expenditure--Disallowance--Excessive and unreasonable payments--Addition for purchases and sales made from sister concern--Finding by Commissioner (Appeals) as well as Tribunal as to genuineness of valuation in transaction between sister concerns not perverse--Findings of fact-- CIT v. Jyoti Industries  (P&H) . . . 573

----Business expenditure--Disallowance--Excessive or unreasonable payments--Trade discount--Discount allowed to sister concern--Assessee claiming 11 per cent. on ground of bulk sales--Assessing Officer allowing 3 per cent., Commissioner (Appeals) enhancing to 8 per cent. while Tribunal reducing to 5 per cent.--Assessee allowed 11 per cent. in earlier years--Assessee entitled to 11 per cent.--Trade discount not an expendi-ture--Section 40A(2)(b) does not apply-- United Exports v. CIT  (Delhi) . . . 549

S. 55A --Capital gains--Valuation of capital asset--Reference to Departmental Valuation Officer--Condition precedent--Opinion of Assessing Officer that value claimed is less than fair market value-- CIT v. Umedbhai International P. Ltd.  (Cal) . . . 506

S. 68 --Cash credits--Burden of proof--Initial burden on assessee to prove identity of creditors--Burden then shifts to Revenue to prove credits were not genuine--Identity of applicants for shares and their PAN numbers furnished--Amounts received through account payee cheques--Inability to find a few applicants--Not sufficient to invoke section 68-- CIT v. Winstral Petrochemicals P. Ltd . (Delhi) . . . 603

S. 69A --Reassessment--Unexplained money--Presumption that represents income of year in which found--Voluntary disclosure under 1997 Scheme of assets stated to be acquired in 1985-86 and 1986-87--Declaration becoming invalid for failure to pay tax--Reassessment for assessment year 1998-99 on basis of disclosure--Permissible-- CIT v. Prem Pal (P&H) . . . 499

S. 119 --Circulars--Scope of-- Deputy CIT v. Sunita Finlease Ltd.  (Chhattisgarh) . . . 491

----Scrutiny of cases--Circular--Circular prescribing time limit of three months for scrutiny for returns filed in financial year 2004-05--Circular binding on Revenue authorities--CBDT Instruction No. 9 of 2004, dated September 20, 2004-- Deputy CIT v. Sunita Finlease Ltd. (Chhattisgarh) . . . 491

S. 132 --Search and seizure--Block assessment--Undisclosed income--Definition--No valid return of income filed by assessee for any of the years of block period--Response to notice issued under section 131 not disclosure for the purpose of Act--Onus on assessee to disclose undisclosed income by way of return before commencement of search--Block assessment on materials seized on search valid--Matter remanded-- CIT v. Sivabala Devi (Mad) . . . 510

S. 143 --Revision--Limitation--Order of assessment subject of rectification--Notice for revision on issue not affected by rectification and referring to order of assessment--Limitation to be reckoned from date of assessment order, not date of rectification-- CIT v. Shriram Engineering Construction Co. Ltd . (Mad) . . . 568

S. 143(3) --Rectification of mistakes--Loss--Set-off--Debatable issue not mistake apparent from record--Wrong allowance of set off of losses could not be rectified under section 154-- CIT v. Soora Subramanian (Mad) . . . 591

S. 147 --Reassessment--Unexplained money--Presumption that represents income of year in which found--Voluntary disclosure under 1997 Scheme of assets stated to be acquired in 1985-86 and 1986-87--Declaration becoming invalid for failure to pay tax--Reassessment for assessment year 1998-99 on basis of disclosure--Permissible-- CIT v. Prem Pal (P&H) . . . 499

S. 148 --Reassessment--Unexplained money--Presumption that represents income of year in which found--Voluntary disclosure under 1997 Scheme of assets stated to be acquired in 1985-86 and 1986-87--Declaration becoming invalid for failure to pay tax--Reassessment for assessment year 1998-99 on basis of disclosure--Permissible-- CIT v. Prem Pal (P&H) . . . 499

S. 154 --Rectification of mistakes--Loss--Set-off--Debatable issue not mistake apparent from record--Wrong allowance of set off of losses could not be rectified under section 154-- CIT v. Soora Subramanian (Mad) . . . 591

----Revision--Limitation--Order of assessment subject of rectification--Notice for revision on issue not affected by rectification and referring to order of assessment--Limitation to be reckoned from date of assessment order, not date of rectification-- CIT v. Shriram Engineering Construction Co. Ltd . (Mad) . . . 568

S. 158BB --Search and seizure--Block assessment--Undisclosed income--Definition--No valid return of income filed by assessee for any of the years of block period--Response to notice issued under section 131 not disclosure for the purpose of Act--Onus on assessee to disclose undisclosed income by way of return before commencement of search--Block assessment on materials seized on search valid--Matter remanded-- CIT v. Sivabala Devi (Mad) . . . 510

S. 158BC --Rectification of mistakes--Loss--Set-off--Debatable issue not mistake apparent from record--Wrong allowance of set off of losses could not be rectified under section 154-- CIT v. Soora Subramanian (Mad) . . . 591

----Search and seizure--Block assessment--Undisclosed income--Definition--No valid return of income filed by assessee for any of the years of block period--Response to notice issued under section 131 not disclosure for the purpose of Act--Onus on assessee to disclose undisclosed income by way of return before commencement of search--Block assessment on materials seized on search valid--Matter remanded-- CIT v. Sivabala Devi (Mad) . . . 510

----Search and seizure--Block assessment--Warrant of authorisation issued in joint names of husband and wife--Individual assessment on wife alone--Not valid-- CIT v. Smt. Vandana Verma (All) . . . 533

S. 158BD --Search and seizure--Block assessment--Undisclosed income--Definition--No valid return of income filed by assessee for any of the years of block period--Response to notice issued under section 131 not disclosure for the purpose of Act--Onus on assessee to disclose undisclosed income by way of return before commencement of search--Block assessment on materials seized on search valid--Matter remanded-- CIT v. Sivabala Devi (Mad) . . . 510

S. 192 --Deduction of tax at source--Salary--Effect of sub-section (3) of section 192--Default in deduction can be made up during financial year-- CIT v. Enron Expat Services Inc. (Uttarakhand) . . . 496

S. 201 --Advance tax--Interest--Non-resident--Entire income liable to deduction of tax at source--Assessee not liable for advance tax--Cannot be charged interest for failure to pay advance tax-- Director of Income-tax v. Jacabs Civil Incorporated  (Delhi) . . . 578

----Deduction of tax at source--Salary--Effect of sub-section (3) of section 192--Default in deduction can be made up during financial year-- CIT v. Enron Expat Services Inc. (Uttarakhand) . . . 496

S. 209 --Advance tax--Interest--Non-resident--Entire income liable to deduction of tax at source--Assessee not liable for advance tax--Cannot be charged interest for failure to pay advance tax-- Director of Income-tax v. Jacabs Civil Incorporated  (Delhi) . . . 578

S. 220(2A) --Recovery of tax--Interest on delayed payment of tax--Waiver of interest--Conditions precedent--Conditions laid down in section 220(2A) are cumulative--Payment of interest whether would cause genuine hardship to assessee--Income of relevant period to be taken into account--Past liabilities not relevant--Finding that payment of interest would not cause genuine hardship--Refusal to waive interest--Justified-- P. Sudhakaran v. Deputy CIT (Ker) . . . 488

----Recovery of tax--Interest--Waiver of interest--Law applicable--Section 220(2A) inserted with effect from 1-10-1984--Not applicable where assessments completed and demand notices issued before 1-10-1984--Writ petition challenging validity of provision--Failure to pay tax under disputed provision--Presumption of validity of provision--Provision subsequently held valid by Supreme Court--Levy of interest justified-- Prakash Tubes Ltd. v. Union of India (Delhi) . . . 561

S. 234B --Advance tax--Interest--Non-resident--Entire income liable to deduction of tax at source--Assessee not liable for advance tax--Cannot be charged interest for failure to pay advance tax-- Director of Income-tax v. Jacabs Civil Incorporated  (Delhi) . . . 578

S. 234D --Interest--Interest on excess refund--Provision not applicable prior to assessment year 2004-05-- Director of Income-tax v. Jacabs Civil Incorporated  (Delhi) . . . 578

S. 263 --Revision--Limitation--Order of assessment subject of rectification--Notice for revision on issue not affected by rectification and referring to order of assessment--Limitation to be reckoned from date of assessment order, not date of rectification-- CIT v. Shriram Engineering Construction Co. Ltd . (Mad) . . . 568

S. 271(1)(c) --Penalty--Assessee claiming revenue expenditure--Penalty imposed holding expenditure capital--Finding by Commissioner (Appeals) as well as Tribunal that issue debatable--Penalty not attracted-- CIT v. Krishna Maruti Ltd.  (Delhi) . . . 547

----Penalty--Concealment of income--Assessee computing pre-operative expenses after deducting interest and showing in balance-sheet filed along with return of income--Assessing Officer holding that interest cannot be adjusted against pre-operative expenses--Not a case of concealment of income--Penalty cannot be imposed-- CIT v. Mushashi Autoparts India P. Ltd. (Delhi) . . . 545




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