Asstt. CIT & Anr. v. Hotel Blue Moon
Counsel: V. Shekhar with Aryit Prasad, Kunal Bahri, B.V. Balaram Das, Hrishikesh Banian, Balvir Singh Dosanjh, Jagjit Singh Chhabra, Dr. Rakesh Gupta, Amboj Kumar Sinha & Aarti Sain, for the Appearing Parties
JUDGMENT
Leave granted in all the special leave petitions.
2. These six appeals have been heard together. They arise out of similar facts and the question of law arising therefrom is the same.
3. The facts in the lead case are : This is an appeal against the judgment of the High Court of Guwahati in an appeal under section 260A of the Income Tax Act, 1961, hereinafter referred to as `the Act', and the point that is raised for our determination is, whether issue of notice under section 143(2) of the Act within the prescribed time for the purpose of block assessment under Chapter XIV-B of the Act is mandatory for assessing undisclosed income detected during search conducted under section 132 of the Act. While, according to the department, issue of a notice under section 143(2) is not essential requirement in block assessment under Chapter XIV-B of the Act. According to the assessee, service of notice on the assessee under section 143(2) of the Act within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B of the Act. The Tribunal held, while affirming the decision of the Commissioner (Appeals) that non-issue of notice under section 143(2) is only a procedural irregularity and the same is curable. In the appeal filed by the assessee before the Guwahati High Court, the following two questions of law were raised for consideration and decision of the High Court, they were :
"(1) Whether on the facts and in circumstances of the case the issuance of notice under section 143(3) (sic—143(2)) of the Income Tax Act, 1961 within the prescribed time-limit for the purpose of making the assessment under section 143(3) of the Income Tax Act, 1961 is mandatory ? and.
(2) Whether, on the facts and in the circumstances of the case and in view of the undisputed findings arrived at by the Commissioner (Appeals), the additions made under section 68 of the Income Tax Act, 1961 should be deleted or set aside ?"
4. The High Court, disagreeing with the Tribunal, held, that the provisions of section 142 and sub-sections (2) and (3) of section 143 will have mandatory application in a case where the assessing officer in repudiation of return filed in response to a notice issued under section 158BC(a) proceeds to make an inquiry. Accordingly, the High Court answered the question of law framed in affirmative and in favour of the appellant and against the revenue. The revenue thereafter applied to this court for special leave under article 136, and the same was granted, and hence this appeal.
5. The learned counsel Sri Shekhar for the revenue submitted, that, Chapter XIV-B of the Act provides a special procedure for search cases and is a complete code in itself dealing with both the substantive as well as procedural aspects of search cases and, therefore, there is a distinction between the procedure for regular assessment under Chapter XIV and the procedure of block assessment under Chapter XIV-B. Therefore, it is submitted for the purpose of block assessments the assessing authority need not follow the procedure prescribed under Chapter XIV which includes issuance of notice under section 143(2). The learned counsel has further contended that in a proceeding under section 158BC, there is no requirement of a notice to be issued under section 143(2), since issuance of notice for the purpose of section 158BC is separately prescribed. It is further submitted that block assessment is in addition to regular assessment, and what is included in regular assessment, cannot be assessed again in the course of a block assessment and similarly, what is assessed in block assessment, cannot be the subject-matter of regular assessment. It is further submitted that section 143(2) of the Act is in two parts. The first part deals with jurisdiction and the second with the procedure. The proviso to section 143(2) puts an embargo on the assessing officer to exercise jurisdiction after the expiry of 12 months- from the end of the month in which the return was filed by the assessee. It is the discretion of the assessing officer to accept the return as it is or to proceed further with the assessment of income, once the assessing officer decides to proceed, he has to issue notice under section 143(2) within the prescribed time-limit to make the assessee aware that his return has been selected for scrutiny assessment. In distinction to this procedure, under the special procedure prescribed in Chapter XIV-B, there is no discretion left with the assessing officer. It is further contended that the source and origin of a block assessment is the search which has been conducted under section 132 of the Act. Once the search has been carried out, the assessing officer is left with no discretion but to proceed with the block assessment. It is also submitted that in search cases the material is already found and is in the knowledge of the assessing officer. This is distinct and different from the situation of an ordinary assessment, where, the assessing officer does not have any material other than the return filed by the assessee. Therefore, the requirement of notice under section 143(2) is essential for production of material by the assessee. This is so because in regular assessments the assessing officer in the first instance has no material available to him except the return filed by the assessee. It is further submitted that the computation of undisclosed income of the block period has to be done in accordance with the provisions of section 158BB and on the basis of evidence found as a result of search or requisition of books of account, or other documents and such other materials or information as are available with the assessing officer and relatable to such evidence and, therefore, issuance of notice under section 143(2) is not required for block assessment proceedings. It is further submitted that the provisions of section 143(2) and other provisions mentioned in section 158BC(b) are to be applied only to the extent possible, since the provisions incorporated in the Chapter XIV-B constitute a special Code to assess the undisclosed income in search cases, they would override the provisions of Chapter XIV being the procedure for normal assessments. In support of this contention, reference is made to the decision of this court in the case of Dr. Partap Singh & Anr. v. Director of Enforcement & Ors. (1985) 155 ITR 166 (SC). Lastly, it is submitted, that, since both the schemes under Chapter XIV for a regular assessment and under Chapter XIV-B for block assessments are different that while no assessment under section 143(3) could be completed without the issuance of notice under section 143(2), the same restriction would not be applicable in the case of block assessment.
6. Per contra, the contention on behalf of the assessee(s) is that, for the purpose of block assessment under section 158BC, the provisions of section 142 and sub-sections (2) and (3) of section 143 are applicable and, therefore, no block assessments could be made without issuing notice under section 143(2) of the Act. It is further contended that notice under section 143(2) could have been dispensed with by the assessing officer if he proceeds to determine the income on the basis of the return without going for scrutiny. Referring to the provisions in clause (v) of the second proviso to section 158BC, it is submitted by the learned counsel that the words "so far as may be" does not give any discretion to the assessing officer to dispense with the requirement of such a notice under section 143(2), when he proceeds to make an enquiry within the scope and ambit of section 143(2). It is further contended that after a notice under section 158BC is issued, the assessee is required to file a return within a stipulated period. Once the return is filed, it is open to the assessing officer to accept the same or to require further investigation. If he accepts the return of undisclosed income as it is, then, there would be no necessity of issuing any notice under section 143(2) of the Act. However, if the assessing officer is not satisfied with the return so filed, then he is required to issue further notice under section 143(2) before an assessment order is passed under Chapter XIV-B of the Act.
7. The only question that arises for our consideration in this batch of appeals is, whether service of notice on the assessee under section 143(2) within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B of the Income Tax Act, 1961 ?
8. Chapter XIV-B prescribes the special procedure for making the assessment of search cases.
9. Section 158B defines "undisclosed income", and "block period" which are the two basic factors for framing the block assessments.
10. Section 158BA is an enabling section, empowering the assessing officer, to assess "undisclosed income" as a result of search initiated or requisition made after 30-6-1995, in accordance with the provisions of this chapter and tax the same at the fixed rate specified in section 113. Section 158BB provides the methodology for computation of undisclosed income of the block period. Section 158BC prescribes the procedure for making the block assessment of the searched person. Section 158BD enables assessment of any person, other than the searched person. Section 158BE sets the time-limits for completion of the block assessments. Section 158BF provides for immunity from levy of interest under sections 234A, 234B and 234C and penalties under sections 271(1)(c), 271A and 271B. Section 158BFA provides for levy of interest and penalty in cases of search on or after 1-1-1997. Section 158BG specifies the authorities competent to make the block assessment. Section 158BH provides for application of all the other provisions of this Act, except those as provided in Chapter XIV-B. Section 158BI provides for abolition of the scheme in cases of search after 31-5-2003.
11. The scheme of block assessment has been explained by Central Board of Direct Taxes in para 39.3 of Circular No. 717, dated 14-8-1995 (1995) 215 ITR 70 (St)). We may only notice clause (e) of the circular which provides for the procedure for making block assessment. Omitting what is not necessary for the purpose of this case, clause (e) is extracted and it reads as under :
"(e) Procedure for making block assessment : (i) The assessing officer shall serve a notice on such person requiring him to furnish within such time, not being less than 15 days, as may be specified in the notice, a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142 setting forth his total income including undisclosed income for the block period. The officer shall proceed to determine the undisclosed income of the block period and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall apply accordingly."
12. Chapter XIV-B provides for an assessment of the undisclosed income unearthed as a result of search without affecting the regular assessment made or to be made. Search is the sine qua non for the block assessment. The special provisions are devised to operate in the distinct' field of undisclosed income and are clearly in addition to the regular assessments covering the previous years falling in the block period. The special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. It is not intended to be substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done of to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the assessing officer. Therefore, the income assessable in block assessment under Chapter XIV-B is the income not disclosed but found and determined as the result of search under section 132 or requisition under section 132A of the Act.
13. Section 158BC stipulates that the chapter would have application Where search has been effected under section 132 or on requisition of books of accounts, other documents or assets under section 132A. By making the notice issued under this section mandatory, it makes such notice the very foundation for jurisdiction. Such notice under the section is required to be served on the person who is found to be having undisclosed income.
The section itself prescribes the time-limit of 15 days for compliance. In respect of searches on or after 1-1-1997, the time-limit may be given up to 45 days instead of 15 days for compliance. Such notice is prescribed under rule 12(1A) which in turn prescribes Form 2B for block return.
14. Section 158BC(b) is a procedural provision for making a regular assessment applicable to block assessment as well. Section 158BC(c) would require the assessing officer to compute the income as well as tax on completion of the proceedings to be made. Section 158BC(d) would authorise the assessing officer to apply the assets seized in the same manner as are applied under section 132B.
15. We may now revert back to section 158BC(b) which is the material provision which requires our consideration. Section 158BC(b) provides for enquiry and assessment. The said provision reads "that the assessing officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall, so far as may be, apply." An analysis of this sub-section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under section 143(2)/142 and complete the assessment under section 143(3). This section does not provide for accepting the return as provided under section 143(1)(a). The assessing officer has to complete the assessment under section 143(3) only. In case of default in not filing the return or not complying with the notice under section 143(2)/142, the assessing officer is authorized to complete the assessment ex parte under section 144. Clause (b) of section 158BC by referring to sections 143(2) and 143(3) would appear to imply that the provisions of section 143(1) are excluded. But section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under section 143(2). However, if an assessment is to be completed under section 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the section 158BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This section even speaks of sub-sections which are to be followed by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XTV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under section 158BC(a), the assessing officer must necessarily issue notice under section 143(2) of the Act within the time prescribed in the proviso to section 143(2) of the Act. Where the legislature intended to exclude certain provisions from the ambit of section 158BC(b) it has done so specifically. Thus, when section 158BC(b) specifically refers to(sic-s. 143(2)) applicability of the proviso thereto cannot be excluded. We may also notice here itself that the clarification given by CBDT in its Circular No. 717, dated 14-8-1995, has a binding effect on the department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of section 143 of the Act. Accordingly, we conclude even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of section 158BC, the provisions of section 142 and sub-sections (2) and (3) of section 143 are applicable and no assessment could be made without issuing notice under section 143(2) of the Act. However, it is contended by Sri Shekhar, learned counsel for the department that in view of the expression "So far as may be" in section 153BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this court in Dr. Partap Singh's case (supra). In this case, the court has observed that section 37(2) provides that "the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under section 37(2). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in section 165 has to be generally followed. The expression "so far as may be" has always been construed to mean that those provisions may be generally followed to the extent possible. The learned counsel for the respondent has brought to our notice the observations made by this court in the case of Maganlal v. Jaiswal Industries & Ors. (1989) 4 SCC 344, wherein this court while dealing with the scope and import of the expression "as far as practicable" has stated "without anything more the expression as far as possible' will mean that the manner provided in the code for attachment or sale of property in execution of a decree shall be applicable in its entirety except such provision therein which may not be practicable to be applied."
16. The case of the revenue is that the expression `so far as may be apply' indicates that it is not expected to follow the provisions of section 142, sub-sections (2) and (3) of section 143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression `so far as may be apply'. In our view, where the assessing officer in repudiation of the return filed under section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142, sub-sections (2) and (3) of section 143.
17. Section 158BH provides for application of the other provisions of the Act.
It reads : "Save as otherwise provided in this chapter, all the other provisions of this Act shall apply to assessment made under this chapter." This is an enabling provision, which makes all the provisions of the Act, save as otherwise provided, applicable for proceedings for block assessment. The provisions which are specifically included are those which are available in Chapter XIV-B of the Act, which includes section 142 and sub-sections (2) and (3) of section 143.
18. On a consideration of the provisions of Chapter XIV-B of the Act, we are in agreement with the reasoning and the conclusion reached by the High Court.
19. The result is that the appeals fail and are dismissed. No order as to costs.
Thursday, October 21, 2010
Section 132: SLP
Monday, October 18, 2010
ITR (TRIB) VOL 5 PART 8
ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 5 : Part 8 (Issue dated : 18-10-2010)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Business expenditure --Deduction--Liability on account of foreign exchange fluctuaztion--To be allowed on accrual basis with reference to rate of foreign exchange at end of year--Income-tax Act, 1961, ss. 37, 43A-- HLS Asia Ltd . v. Deputy CIT (Delhi) . . . 774
Charitable purpose --Charitable trust--Registration--Commissioner to satisfy himself about object of trust and genuineness of activities of trust--Trust deed disclosing establishment of trust for purpose of setting up and running educational institution--Activity charitable in nature and genuineness of activity established--Conditions of registration fulfilled--Direction to Commissioner to grant registration--Income-tax Act, 1961, ss. 2(15), 12A, 12AA-- Shri Krishna Education and Welfare Trust v. CIT (Delhi) . . . 750
Depreciation --Plant and machinery--Higher rate allowed in previous years--Assessee entitled to higher depreciation present year also--Income-tax Act, 1961, s. 32-- HLS Asia Ltd. v. Deputy CIT (Delhi) . . . 774
----Transaction of purchase and lease of cylinders --Purchase and lease of cylinders confirmed by parties--No material produced by Assessing Officer to prove transaction not genuine--Assessee entitled to depreciation--Income-tax Act, 1961, s. 32-- Asst. CIT v. Banaras Beads Ltd. (Delhi) . . . 761
Export --Special deduction--Capital assets not constituting trading items of assessee--Not allowable--Income-tax Act, 1961, s. 80HHC-- HLS Asia Ltd. v. Deputy CIT (Delhi) . . . 774
----Special deduction--Receipt of convertible foreign exchange--Extension of time granted by competent authority--Receipt of export sales in convertible foreign exchange before completion of assessment--Export receipts to be included--Income-tax Act, 1961, ss. 80HHC(2), 155(13)-- Asst. CIT v. Banaras Beads Ltd. (Delhi) . . . 761
Income from house property --Deductions--Repairs and vacancy allowance--Commissioner directing Assessing Officer to verify if municipal tax paid and reduce it from annual value to allow deduction--Direction of Commissioner in consonance with legal provisions--Income-tax Act, 1961-- SICAL Logistics Ltd. v. Addl. CIT (Chennai) . . . 801
----Revision--Annual value--Determination of annual value--Property let out to group concern--Fixation of annual value of property by Corporation at higher rate--Commissioner directing Assessing Officer to examine issue considering sections 23 and 24 of Act--Proper--Income-tax Act, 1961, ss. 23, 24, 263-- SICAL Logistics Ltd. v. Addl. CIT (Chennai) . . . 801
Industrial undertaking --Special deduction--Assessee to be given deduction where allowed in previous years--Income-tax Act, 1961, s. 80-IB-- HLS Asia Ltd. v. Deputy CIT (Delhi) . . . 774
Penalty --Acceptance and repayment of loans or deposits in cash--Change of law--Amendment with effect from June 1, 2003 bringing repayment of loans within purview of provision--Repayment of loans in cash prior to amendment--No penalty imposable--Income-tax Act, 1961, ss. 269T, 271E-- ITO v. Sudesh Kumar Sareen (Delhi) . . . 829
Revision --Notice issued on ground profits low--Failure to show error in assessment order--Revision order set aside--Income-tax Act, 1961, s. 263-- SICAL Logistics Ltd. v. Addl. CIT (Chennai) . . . 801
Wealth-tax --Net wealth--Debt owed--Loans obtained for working capital against security of lands--Not debts incurred in relation to lands--Cannot be deducted while computing net wealth--Wealth-tax Act, 1957, s. 2(m)-- Phoenix International Ltd. v. Deputy CWT (Delhi) . . . 787
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
S. 2(15) --Charitable purpose--Charitable trust--Registration--Commissioner to satisfy himself about object of trust and genuineness of activities of trust--Trust deed disclosing establishment of trust for purpose of setting up and running educational institution--Activity charitable in nature and genuineness of activity established--Conditions of registration fulfilled--Direction to Commissioner to grant registration-- Shri Krishna Education and Welfare Trust v. CIT (Delhi) . . . 750
S. 12A --Charitable purpose--Charitable trust--Registration--Commissioner to satisfy himself about object of trust and genuineness of activities of trust--Trust deed disclosing establishment of trust for purpose of setting up and running educational institution--Activity charitable in nature and genuineness of activity established--Conditions of registration fulfilled--Direction to Commissioner to grant registration-- Shri Krishna Education and Welfare Trust v. CIT (Delhi) . . . 750
S. 12AA --Charitable purpose--Charitable trust--Registration--Commissioner to satisfy himself about object of trust and genuineness of activities of trust--Trust deed disclosing establishment of trust for purpose of setting up and running educational institution--Activity charitable in nature and genuineness of activity established--Conditions of registration fulfilled--Direction to Commissioner to grant registration-- Shri Krishna Education and Welfare Trust v. CIT (Delhi) . . . 750
S. 23 --Income from house property--Revision--Annual value--Determination of annual value--Property let out to group concern--Fixation of annual value of property by Corporation at higher rate--Commissioner directing Assessing Officer to examine issue considering sections 23 and 24 of Act--Proper-- SICAL Logistics Ltd. v. Addl. CIT (Chennai) . . . 801
S. 24 --Income from house property--Revision--Annual value--Determination of annual value--Property let out to group concern--Fixation of annual value of property by Corporation at higher rate--Commissioner directing Assessing Officer to examine issue considering sections 23 and 24 of Act--Proper-- SICAL Logistics Ltd. v. Addl. CIT (Chennai) . . . 801
S. 32 --Depreciation--Plant and machinery--Higher rate allowed in previous years--Assessee entitled to higher depreciation present year also-- HLS Asia Ltd. v. Deputy CIT (Delhi) . . . 774
----Depreciation--Transaction of purchase and lease of cylinders--Purchase and lease of cylinders confirmed by parties--No material produced by Assessing Officer to prove transaction not genuine--Assessee entitled to depreciation-- Asst. CIT v. Banaras Beads Ltd. (Delhi) . . . 761
S. 37 --Business expenditure--Deduction--Liability on account of foreign exchange fluctuaztion--To be allowed on accrual basis with reference to rate of foreign exchange at end of year-- HLS Asia Ltd . v. Deputy CIT (Delhi) . . . 774
S. 43A --Business expenditure--Deduction--Liability on account of foreign exchange fluctuaztion--To be allowed on accrual basis with reference to rate of foreign exchange at end of year-- HLS Asia Ltd . v. Deputy CIT (Delhi) . . . 774
S. 80HHC --Export--Special deduction--Capital assets not constituting trading items of assessee--Not allowable-- HLS Asia Ltd. v. Deputy CIT (Delhi) . . . 774
S. 80HHC(2) --Export--Special deduction--Receipt of convertible foreign exchange --Extension of time granted by competent authority--Receipt of export sales in convertible foreign exchange before completion of assessment--Export receipts to be included-- Asst. CIT v. Banaras Beads Ltd. (Delhi) . . . 761
S. 80-IB --Industrial undertaking--Special deduction--Assessee to be given deduction where allowed in previous years-- HLS Asia Ltd. v. Deputy CIT (Delhi) . . . 774
S. 155(13) --Export--Special deduction--Receipt of convertible foreign exchange--Extension of time granted by competent authority--Receipt of export sales in convertible foreign exchange before completion of assessment--Export receipts to be included-- Asst. CIT v. Banaras Beads Ltd. (Delhi) . . . 761
S. 263 --Income from house property--Revision--Annual value--Determination of annual value--Property let out to group concern--Fixation of annual value of property by Corporation at higher rate--Commissioner directing Assessing Officer to examine issue considering sections 23 and 24 of Act--Proper-- SICAL Logistics Ltd. v. Addl. CIT (Chennai) . . . 801
----Revision--Notice issued on ground profits low--Failure to show error in assessment order--Revision order set aside-- SICAL Logistics Ltd. v. Addl. CIT (Chennai) . . . 801
S. 269T --Penalty--Acceptance and repayment of loans or deposits in cash--Change of law--Amendment with effect from June 1, 2003 bringing repayment of loans within purview of provision--Repayment of loans in cash prior to amendment--No penalty imposable-- ITO v. Sudesh Kumar Sareen (Delhi) . . . 829
S. 271E --Penalty--Acceptance and repayment of loans or deposits in cash--Change of law--Amendment with effect from June 1, 2003 bringing repayment of loans within purview of provision--Repayment of loans in cash prior to amendment--No penalty imposable-- ITO v. Sudesh Kumar Sareen (Delhi) . . . 829
Wealth-tax Act, 1957 :
S. 2(m) --Wealth-tax--Net wealth--Debt owed--Loans obtained for working capital against security of lands--Not debts incurred in relation to lands--Cannot be deducted while computing net wealth-- Phoenix International Ltd. v. Deputy CWT (Delhi) . . . 787
Monday, October 11, 2010
ITAT DEL : Member who has taken a view should not be party to a Special Bench
CLC & Sons vs. ACIT
(ITAT Delhi Special Bench)
In the interest of judicial discipline, a Member who has taken a view should not be party to a Special Bench
A 3 Member Special Bench was constituted to decide whether the assessee was entitled to claim depreciation u/s 32 on intangible assets termed 'Goodwill'. At the hearing, the assessee raised a preliminary objection that as the Judicial Member on the Special Bench has already taken a view about allowability of depreciation on goodwill in the case of Bharatbhai J. Vyas vs. ITO 97 ITD 248 (Ahd.) judicial discipline requires that this Special Bench should consist of persons who have not already taken a view.
Pursuant to this, the Judicial Member expressed the opinion that having already taken a view on the issue of llowability of depreciation on goodwill, it will be in the interest of judicial discipline to recuse himself from the hearing of the appeal before the Special Bench
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Sunday, October 10, 2010
SC: Law Of Natural Justice Has Limits
Kanwar Natwar Singh vs. Directorate of Enforcement (Supreme Court)
Non-furnishing of "all documents" does not violate principles of natural justice
Natwar Singh & Jagat Singh ("Natwar Singh") were alleged to have dealt in and acquired Foreign Exchange totaling US $ 8,98,027 in respect of some Iraq oil contracts in contravention of FEMA. A notice was issued asking Natwar Singh to show-cause why an inquiry should not be held against them. In response, Natwar Singh demanded that the Adjudicating Authority furnish "copies of all documents in … possession in respect of the instant case, including the 83000 documents allegedly procured by one Virender Dayal". The Adjudicating Authority furnished copies of the documents as were relied upon by it but declined to furnish copies of other documents and decided to hold an inquiry in accordance with FEMA. This non-furnishing of "all documents" was challenged by Natwar Singh in the Delhi High Court which dismissed the challenge. Natwar Singh challenged the decision of the High Court in the Supreme Court. HELD, dismissing the appeal:
(i) The extent of applicability of principles of natural justice depends upon the nature of inquiry, the consequences that may visit a person after such inquiry from out of the decision pursuant to such inquiry. The right to fair hearing is a guaranteed right. Every person before an Authority exercising the adjudicatory powers has a right to know the evidence to be used against him. Dhakeswari Cotton Mills Ltd. vs. CIT 26 ITR 775 (SC) followed;
(ii) However, the principles of natural justice do not require supply of documents upon which no reliance has been placed by the Authority to set the law into motion. Supply of relied on documents based on which the law has been set into motion would meet the requirements of principles of natural justice;
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Thursday, October 7, 2010
ITAT (MUM): Banks are not liable to pay S. 115JB MAT on “book profits”
Krung Thai Bank PCL vs. JDIT (ITAT Mumbai)
Banks are not liable to pay S. 115JB MAT on "book profits"
The assessee, a foreign bank operating in India through a branch office, filed a return offering Nil income as per the normal provisions of the Act. Though the assessee had a net profit of Rs. 78.32 lakhs in the P&L A/c it did not compute "book profits" u/s 115JB. The AO accepted the return u/s 143(3) though he subsequently made a reassessment u/s 147 in which he assessed the "book profits" u/s 115JB. The assessee challenged the reopening on the ground that s. 115JB did not apply to banking companies. HELD upholding the challenge:
(i) S. 115 JB can only come into play when the assessee is required to prepare its profit and loss account in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. The starting point of computation of minimum alternate tax u/s 115 JB is the result shown by such a profit and loss account. In the case of banking companies, however, the provisions of Schedule VI are not applicable in view of exemption set out under proviso to S. 211 (2) of the Companies Act. The final accounts of banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act. Consequently, s. 115 JB cannot be applied to a banking company;
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Wednesday, October 6, 2010
ITR(Tribunal) Vol 5 Part 7
ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 5 : Part 7 (Issue dated : 11-10-2010)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Appeal to Commissioner (Appeals) --Maintainability--Interest--Denial of liability to pay interest by assessee--Issue appealable--Income-tax Act, 1961, s. 220(2)-- Asst. CIT v. Hemendra M. Kothari (Mumbai) . . . 646
Assessment --Appeal to Appellate Tribunal--Order passed by Assessing Officer consequent to order of Tribunal--Tribunal holding that particular amount arising on transfer of shares not assessable in assessment year 1997-98 but in subsequent year--Tribunal not considering whether amount business income or capital gains--Assessing Officer cannot assess income in subsequent year as business income--Income-tax Act, 1961-- Asst. CIT v. Hemendra M. Kothari (Mumbai) . . . 646
Capital or revenue expenditure --Payment made for obtaining vacant and peaceful possession of premises under sub-lease--Landlord, tenants and sub-tenants and assessee-firm consisting of persons related inter se--No dispute existing--Question of payment for obtaining possession does not arise--Expenditure for renovation of leased premises--Not allowable--Income-tax Act, 1961, s. 32, Expln. 1 -- ITO v. Pritam Juice (Mumbai) . . . 664
Income --Accrual of income--Retention money--Bank guarantee in respect of due performance of contract and deficiencies in goods and equipment--Income from sale accruing to assessee at time of delivery of product and income from installation and commission at time of rendering services--Amount received in respect of delivered goods not installed to be treated as advance--Retention money cannot be excluded from total income--Income-tax Act, 1961-- Emerson Network Power India P. Ltd. v. Asst. CIT (Mumbai) . . . 727
Income from other sources --Interest--Loan obtained for setting up factory--Part of loan and capital contribution deposited in fixed deposit account--Not a condition precedent for disbursement of loan--Interest earned on fixed deposit assessable as income from other sources--Income-tax Act, 1961, s. 56-- Positive Packaging Industries Ltd. v. ITO (Mumbai) . . . 656
Industrial undertaking --Special deduction under section 80-I--Income derived from industrial undertaking alone to be considered as source of income for purpose of section 80-I(6)--Unabsorbed losses, depreciation and investment allowance set off against income of assessee from interest, capital gain and dividend in assessment years 1988-89 to 1991-92--To be reduced in accordance with section 80-I(6) from current year's profit for computation of deduction under section 80-I--Income-tax Act, 1961, s. 80-I-- Gujarat Ambuja Cements Ltd. v. Deputy CIT (Mumbai) . . . 689
----Special deduction--Industrial undertaking not carrying out trading activities--Deduction not allowable on profits and gains derived from any activity incidental to manufacturing activity--Assessee not entitled to deduction on profits of trading activities--Income-tax Act, 1961, s. 80-IA-- Emerson Network Power India P. Ltd. v. Asst. CIT (Mumbai) . . . 727
Search and seizure --Block assessment--Income disclosed prior to search cannot be assessed under sections 158BC and 158BD--Income-tax Act, 1961, ss. 158BC, 158BD-- Deputy CIT v. Suresh Chand Bafna (Chennai) . . . 675
Words and phrases --"Profits and gains derived from industrial undertaking or business of hotel" and "any business of"-- Emerson Network Power India P. Ltd. v. Asst. CIT (Mumbai) . . . 727
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
S. 32, Expln. 1 --Capital or revenue expenditure--Payment made for obtaining vacant and peaceful possession of premises under sub-lease--Landlord, tenants and sub-tenants and assessee-firm consisting of persons related inter se--No dispute existing --Question of payment for obtaining possession does not arise--Expenditure for renovation of leased premises--Not allowable-- ITO v. Pritam Juice (Mumbai) . . . 664
S. 56 --Income from other sources--Interest--Loan obtained for setting up factory--Part of loan and capital contribution deposited in fixed deposit account--Not a condition precedent for disbursement of loan--Interest earned on fixed deposit assessable as income from other sources-- Positive Packaging Industries Ltd. v. ITO (Mumbai) . . . 656
S. 80-I --Industrial undertaking--Special deduction under section 80-I--Income derived from industrial undertaking alone to be considered as source of income for purpose of section 80-I(6)--Unabsorbed losses, depreciation and investment allowance set off against income of assessee from interest, capital gain and dividend in assessment years 1988-89 to 1991-92--To be reduced in accordance with section 80-I(6) from current year's profit for computation of deduction under section 80-I-- Gujarat Ambuja Cements Ltd. v. Deputy CIT (Mumbai) . . . 689
S. 80-IA --Industrial undertaking--Special deduction--Industrial undertaking not carrying out trading activities--Deduction not allowable on profits and gains derived from any activity incidental to manufacturing activity--Assessee not entitled to deduction on profits of trading activities-- Emerson Network Power India P. Ltd. v. Asst. CIT (Mumbai) . . . 727
S. 158BC --Search and seizure--Block assessment--Income disclosed prior to search cannot be assessed under sections 158BC and 158BD-- Deputy CIT v. Suresh Chand Bafna (Chennai) . . . 675
S. 158BD --Search and seizure--Block assessment--Income disclosed prior to search cannot be assessed under sections 158BC and 158BD-- Deputy CIT v. Suresh Chand Bafna (Chennai) . . . 675
S. 220(2) --Appeal to Commissioner (Appeals)--Maintainability--Interest--Denial of liability to pay interest by assessee--Issue appealable-- Asst. CIT v. Hemendra M. Kothari (Mumbai) . . . 646
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ITR VOL 327 PART 4
Volume 327 : Part 4 (Issue dated 11-10-2010)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Appeal to Commissioner (Appeals) --Power to admit additional evidence--Duty to allow Assessing Officer opportunity to examine additional evidence--Tribunal holding violation of rule for failure to allow Assessing Officer to cross-examine witnesses, but directing consideration of evidence dispensing with cross-examination--Not proper--Assessee to produce witnesses--Income-tax Rules, 1962, r. 46A-- CIT v. Subbu Shashank (Mad) . . . 577
Appeal to High Court --Competency of appeal--Monetary limit laid down in CBDT Circular--Binding on Revenue--Tax effect less than monetary limit--Appeal not maintainable--Income-tax Act, 1961, s. 260A--Circular 5 of 2008-- CIT v. Abhinash Gupta (P&H) . . . 619
Business expenditure --Disallowance--Salary and perquisites--Disallowance governed by first proviso to section 40A(5)(a) not section 40A(5)(c)--Income-tax Act, 1961, s. 40A(5)(a), (c)-- CIT v. Modi Industries Limited (Delhi) . . . 570
Cash credits --Share application money--Substantial evidence produced by assessee to prove creditworthiness of creditor and genuineness of share application--Failure to produce creditor not material--Deletion of addition--No interference--Income-tax Act, 1961, s. 68-- CIT v. Orbital Communication (P) Ltd. (Delhi) . . . 560
Commissioner --Revision--Non-consideration of appraisal report by Assessing Officer--Appraisal report essential for making assessment--Revision by Commissioner justified--Income-tax Act, 1961, s. 263-- CIT v. Daga Entrade P. Ltd. (Gauhati) . . . 467
Deduction of tax at source --Double taxation relief--Verification of certificates of tax deducted at source in two different countries--Letter informing assessee verification not practicable--Writ petition not maintainable--Income-tax Act, 1961, ss. 4, 5, 201(1A)--Constitution of India, art. 226-- V. Ganesh v. Asst. CIT (Mad) . . . 564
Depreciation --Initial depreciation--"Building", meaning of--New residential quarters--Initial depreciation allowable--Income-tax Act, 1961, s. 32(1)(iv)-- CIT v. Modi Industries Limited (Delhi) . . . 570
Income --Accrual of income--Sugar manufacturer realizing price in excess of that fixed by Government on condition excess would be refunded if its challenge failed--Excess amount a contingent receipt--Not taxable-- CIT v. Modi Industries Limited (Delhi) . . . 570
----Mutual association--Essence of mutuality--Complete identity between contributors and participators--Firm engaged in property development, commission agency and allied activities--Not a mutual association--Income of firm assessable--Income-tax Act, 1961-- Prabhashankar Plaza v. ITO (Karn) . . . 582
Income from undisclosed sources --Payment made to another assessee--Addition--Assessee failing to produce books of account--Finding that payment made out of undisclosed sources and addition proper--Findings of fact--Income-tax Act, 1961, s. 69-- Manak Chand Agarwal v. CIT (P&H) . . . 486
Income-tax survey --Statement made at time of survey not conclusive--Undisclosed money--Retraction of statement at time of assessment found bona fide by Commissioner (Appeals)--Explanation for failure to write up books for two and a half years accepted by Commissioner (Appeals) and additions deleted--Tribunal affirming on ground no defect found in books and material available with assessee for writing up books primary evidence--Findings of fact--Income-tax Act, 1961, ss. 69, 69A, 133A-- ITO v. Vijay Kumar Kesar (Chhattisgarh) . . . 497
Industrial undertaking --Special deduction under section 80-IA--Condition precedent--Profit must be "derived" from industrial undertaking--Meaning of "derived"--Freight subsidy received from Government--Not derived from industrial undertaking--Not entitled to be taken into account for computing special deduction under section 80-IA--Income-tax Act, 1961, s. 80-IA-- CIT v. Kiran Enterprises (HP) . . . 520
----Special deduction--Benefit allowed in three preceding years--Assessee entitled to deduction for following year--Income-tax Act, 1961, s. 80J-- CIT v. Modi Industries Limited (Delhi) . . . 570
Interest-tax --Charge of tax--Financial company--Definition--Leasing business--Difference between financial lease and operational lease--Company carrying on financial lease would be chargeable to tax--Matter remanded--Interest-tax Act, 1974, s. 2(5B)-- CIT v. Motor and General Finance Ltd. (Delhi) . . . 530
Offences and prosecution --Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings--Income-tax Act, 1961, ss. 273A(4), 276C, 277, 278--Indian Penal Code, 1860, ss. 120B, 193, 196, 420, 511-- N. Athimoolam v. ITO (Mad) . . . 603
Penalty --Concealment of income--Appellate Tribunal--Power to remand--Adequate material not available before Assessing Officer for conclusive determination of issue--Tribunal remanding matter for fresh disposal--Cannot be interfered with--Income-tax Act, 1961, s. 271(1)(c)-- Kamakhya Photo Lab P. Ltd. v. CIT (Gauhati) . . . 565
----Concealment of income--Claim for deduction not bona fide--Amounts to concealment of income--Accounts showing deduction of income-tax and equipment written off--Not allowable deductions--Assessee a company with professional assistance in computing income--Assessee had concealed its income--Liable to pay penalty--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Zoom Communication P. Ltd. (Delhi) . . . 510
----Concealment of income--Companies--Book profits--Total income computed under regular provisions less than book profits--Assessment made under section 115JB--Penalty cannot be levied--Income-tax Act, 1961, ss. 115JB, 271(1)(c)-- CIT v. Nalwa Sons Investments Ltd . (Delhi) . . . 543
----Concealment of income--Value of property assessed as unexplained investment--Rejection of explanation regarding source of funds for acquisition of property--No proof of concealment of income--Penalty could not be levied--Income-tax Act, 1961, s. 271(1)(c)-- S. V. Kalyanam v. ITO (Mad) . . . 477
Search and seizure --Block assessment--Return--Delay in filing--Interest--Before expiry of time limit assessee seeking copies of documents seized for purpose of filing return--Department delaying supply of copies by over a year--Assessee filing return within forty-five days thereafter--Not to be exonerated from liability to interest--Time taken by Department to supply documents to be excluded from total period reckoned from date of notice--Interest chargeable for delay exceeding forty five days--Income-tax Act, 1961, s. 158BFA(1)-- CIT v. Mesco Airlines Ltd. (Delhi) . . . 554
Total income --Inclusions--Transfer of assets--Transfer of asset to trust for benefit of daughter-in-law and grandchildren of assessee--No direct or indirect transfer to son's wife or grandchildren--Trust an independent legal entity and trustee legal owner of trust property--Income from trust not includible in income of assessee--Income-tax Act, 1961, s. 64(1)(vi)-- CIT v. Smt. Pushpawati (Delhi) . . . 490
Unexplained investment --Scope of section 69--Section 69 confers discretion on income-tax authorities--Assessee applying for tax clearance certificate--Explanation that property owned jointly with spouse and that his spouse and son contributed to purchase--Tribunal not right in not considering explanation--Value of property not assessable as unexplained investment--Income-tax Act, 1961, ss. 69, 230A-- S. V. Kalyanam v. ITO (Mad) . . . 477
Wealth-tax --Reassessment--Grounds for reassessment--Report of Valuation Officer--Report called for after completion of assessment--Not a ground for reassessment--Report called for during pendency of assessment but received after completion of assessment--Valid ground for reassessment--Wealth-tax Act, 1957, ss. 16, 16A, 17-- CWT v. Sona Properties P. Ltd. (Bom) . . . 592
Words and phrases --Meaning of "derived"-- CIT v. Kiran Enterprises (HP) . . . 520
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Art. 226 --Deduction of tax at source--Double taxation relief--Verification of certificates of tax deducted at source in two different countries--Letter informing assessee verification not practicable--Writ petition not maintainable-- V. Ganesh v. Asst. CIT (Mad) . . . 564
S. 4 --Deduction of tax at source--Double taxation relief--Verification of certificates of tax deducted at source in two different countries--Letter informing assessee verification not practicable--Writ petition not maintainable-- V. Ganesh v. Asst. CIT (Mad) . . . 564
S. 5 --Deduction of tax at source--Double taxation relief--Verification of certificates of tax deducted at source in two different countries--Letter informing assessee verification not practicable--Writ petition not maintainable-- V. Ganesh v. Asst. CIT (Mad) . . . 564
S. 32(1)(iv) --Depreciation--Initial depreciation--"Building", meaning of--New residential quarters--Initial depreciation allowable-- CIT v. Modi Industries Limited (Delhi) . . . 570
S. 40A(5)(a), (c) --Business expenditure--Disallowance--Salary and perquisites--Disallowance governed by first proviso to section 40A(5)(a) not section 40A(5)(c)-- CIT v. Modi Industries Limited (Delhi) . . . 570
S. 64(1)(vi) --Total income--Inclusions--Transfer of assets--Transfer of asset to trust for benefit of daughter-in-law and grandchildren of assessee--No direct or indirect transfer to son's wife or grandchildren--Trust an independent legal entity and trustee legal owner of trust property--Income from trust not includible in income of assessee-- CIT v. Smt. Pushpawati (Delhi) . . . 490
S. 68 --Cash credits--Share application money--Substantial evidence produced by assessee to prove creditworthiness of creditor and genuineness of share application--Failure to produce creditor not material--Deletion of addition--No interference-- CIT v. Orbital Communication (P) Ltd. (Delhi) . . . 560
S. 69 --Income from undisclosed sources--Payment made to another assessee--Addition--Assessee failing to produce books of account--Finding that payment made out of undisclosed sources and addition proper--Findings of fact-- Manak Chand Agarwal v. CIT (P&H) . . . 486
----Income-tax survey--Statement made at time of survey not conclusive--Undisclosed money--Retraction of statement at time of assessment found bona fide by Commissioner (Appeals)--Explanation for failure to write up books for two and a half years accepted by Commissioner (Appeals) and additions deleted--Tribunal affirming on ground no defect found in books and material available with assessee for writing up books primary evidence--Findings of fact-- ITO v. Vijay Kumar Kesar (Chhattisgarh) . . . 497
----Unexplained investment--Scope of section 69--Section 69 confers discretion on income-tax authorities--Assessee applying for tax clearance certificate--Explanation that property owned jointly with spouse and that his spouse and son contributed to purchase--Tribunal not right in not considering explanation--Value of property not assessable as unexplained investment-- S. V. Kalyanam v. ITO (Mad) . . . 477
S. 69A --Income-tax survey--Statement made at time of survey not conclusive--Undisclosed money--Retraction of statement at time of assessment found bona fide by Commissioner (Appeals)--Explanation for failure to write up books for two and a half years accepted by Commissioner (Appeals) and additions deleted--Tribunal affirming on ground no defect found in books and material available with assessee for writing up books primary evidence--Findings of fact-- ITO v. Vijay Kumar Kesar (Chhattisgarh) . . . 497
S. 80-IA --Industrial undertaking--Special deduction under section 80-IA --Condition precedent--Profit must be "derived" from industrial undertaking--Meaning of "derived"--Freight subsidy received from Government--Not derived from industrial undertaking--Not entitled to be taken into account for computing special deduction under section 80-IA-- CIT v. Kiran Enterprises (HP) . . . 520
S. 80J --Industrial undertaking--Special deduction--Benefit allowed in three preceding years--Assessee entitled to deduction for following year-- CIT v. Modi Industries Limited (Delhi) . . . 570
S. 115JB --Penalty--Concealment of income--Companies--Book profits--Total income computed under regular provisions less than book profits--Assessment made under section 115JB--Penalty cannot be levied-- CIT v. Nalwa Sons Investments Ltd .(Delhi) . . . 543
S. 133A --Income-tax survey--Statement made at time of survey not conclusive--Undisclosed money--Retraction of statement at time of assessment found bona fide by Commissioner (Appeals)--Explanation for failure to write up books for two and a half years accepted by Commissioner (Appeals) and additions deleted--Tribunal affirming on ground no defect found in books and material available with assessee for writing up books primary evidence--Findings of fact-- ITO v. Vijay Kumar Kesar (Chhattisgarh) . . . 497
S. 158BFA(1) --Search and seizure--Block assessment--Return--Delay in filing--Interest--Before expiry of time limit assessee seeking copies of documents seized for purpose of filing return--Department delaying supply of copies by over a year--Assessee filing return within forty-five days thereafter--Not to be exonerated from liability to interest--Time taken by Department to supply documents to be excluded from total period reckoned from date of notice--Interest chargeable for delay exceeding forty five days-- CIT v. Mesco Airlines Ltd. (Delhi) . . . 554
S. 201(1A) --Deduction of tax at source--Double taxation relief--Verification of certificates of tax deducted at source in two different countries--Letter informing assessee verification not practicable--Writ petition not maintainable-- V. Ganesh v. Asst. CIT (Mad) . . . 564
S. 230A --Unexplained investment--Scope of section 69--Section 69 confers discretion on income-tax authorities--Assessee applying for tax clearance certificate--Explanation that property owned jointly with spouse and that his spouse and son contributed to purchase--Tribunal not right in not considering explanation--Value of property not assessable as unexplained investment-- S. V. Kalyanam v. ITO (Mad) . . . 477
S. 260A --Appeal to High Court--Competency of appeal--Monetary limit laid down in CBDT Circular--Binding on Revenue--Tax effect less than monetary limit--Appeal not maintainable--Circular 5 of 2008-- CIT v. Abhinash Gupta (P&H) . . . 619
S. 263 --Commissioner--Revision--Non-consideration of appraisal report by Assessing Officer--Appraisal report essential for making assessment--Revision by Commissioner justified-- CIT v. Daga Entrade P. Ltd. (Gauhati) . . . 467
S. 271(1)(c) --Penalty--Concealment of income--Appellate Tribunal--Power to remand--Adequate material not available before Assessing Officer for conclusive determination of issue--Tribunal remanding matter for fresh disposal--Cannot be interfered with-- Kamakhya Photo Lab P. Ltd. v. CIT (Gauhati) . . . 565
----Penalty--Concealment of income--Claim for deduction not bona fide--Amounts to concealment of income--Accounts showing deduction of income-tax and equipment written off--Not allowable deductions--Assessee a company with professional assistance in computing income--Assessee had concealed its income--Liable to pay penalty-- CIT v. Zoom Communication P. Ltd. (Delhi) . . . 510
----Penalty--Concealment of income--Companies--Book profits--Total income computed under regular provisions less than book profits--Assessment made under section 115JB--Penalty cannot be levied-- CIT v. Nalwa Sons Investments Ltd . (Delhi) . . . 543
----Penalty--Concealment of income--Value of property assessed as unexplained investment--Rejection of explanation regarding source of funds for acquisition of property--No proof of concealment of income--Penalty could not be levied-- S. V. Kalyanam v. ITO (Mad) . . . 477
S. 273A(4) --Offences and prosecution--Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings-- N. Athimoolam v. ITO (Mad) . . . 603
S. 276C --Offences and prosecution--Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings-- N. Athimoolam v. ITO (Mad) . . . 603
S. 277 --Offences and prosecution--Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings-- N. Athimoolam v. ITO (Mad) . . . 603
S. 278 --Offences and prosecution--Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings-- N. Athimoolam v. ITO (Mad) . . . 603
Ss. 120B, 193, 196, 420, 511 --Offences and prosecution--Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings-- N. Athimoolam v. ITO (Mad) . . . 603
S. 2(5B) --Interest-tax--Charge of tax--Financial company--Definition--Leasing business--Difference between financial lease and operational lease--Company carrying on financial lease would be chargeable to tax--Matter remanded-- CIT v. Motor and General Finance Ltd. (Delhi) . . . 530
Ss. 16, 16A, 17 --Wealth-tax--Reassessment--Grounds for reassessment--Report of Valuation Officer--Report called for after completion of assessment--Not a ground for reassessment--Report called for during pendency of assessment but received after completion of assessment--Valid ground for reassessment-- CWT v. Sona Properties P. Ltd. (Bom) . . . 592
R. 46A --Appeal to Commissioner (Appeals)--Power to admit additional evidence--Duty to allow Assessing Officer opportunity to examine additional evidence--Tribunal holding violation of rule for failure to allow Assessing Officer to cross-examine witnesses, but directing consideration of evidence dispensing with cross-examination--Not proper--Assessee to produce witnesses-- CIT v. Subbu Shashank (Mad) . . . 577
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Tuesday, October 5, 2010
HC (DEL) : Confession made during survey is not conclusive & can be retracted
Take concrete evidence to support the statement.
CIT vs. Dhingra Metal Works (Delhi High Court)
A survey u/s 133A was conducted in the premises of the assessee during which certain discrepancies were found in stock & cash-in-hand. The assessee surrendered an amount of Rs. 99 lakhs and offered the same to tax. The offer included a sum of Rs. 45 lakhs on account of excess stock found during the survey. Subsequently, the assessee retracted the offer of Rs. 45 lakhs in respect of the stock on the ground that the discrepancy noticed during the survey had been reconciled. The AO rejected the retraction on the ground that it was an after-thought though the CIT (A) and Tribunal upheld the assessee's claim on the basis that the AO had not made any independent investigation and had made the addition on the addition solely on the basis of the survey statement. On appeal by the department, HELD dismissing the appeal:
(i) S. 133A does not mandate that any statement recorded under that section would have evidentiary value. It merely enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. For a statement to have evidentiary value, the survey officer should have been authorised to administer oath and to record sworn statement as under s.132 (4). While s. 132(4) specifically authorizes an officer to examine a person on oath, s. 133A does not permit the same. Paul Mathews 263 ITR 101 (Ker) & Kader Khan 300 ITR 157 (Mad) followed;
(ii) In any event though an admission is extremely important piece of evidence, it is not conclusive and it is open to the person who has made the admission to show that it is incorrect.
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S. 80HHC vs. 115JB Ajanta Pharma Reversed By Supreme Court
S. 80HHC vs. 115JB Ajanta Pharma Reversed By Supreme Court
In CIT vs. Ajanta Pharma 318 ITR 252 the Bombay High Court held (reversing the Special Bench judgement in DCIT vs. Syncome Formulations 292 ITR (AT) 144)) that the "sunset clause" of s. 80HHC (1B) applies to s. 115JB as well.
This judgement has been reversed by the Supreme Court today (9.9.2010). It has been held that MAT companies are not subject to the limitations of s. 80HHC (1B).
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