Admeasuring the land

IN THE INCOME TAX APPELLATE TRIBUNAL "NAGPUR", BENCH,  (E-COURT), MUMBAI

BEFORE SHRI R.K.GUPTA, JM & SHRI D.KARUNAKARA RAO, AM

I T A N o.1 64/Nag/ 20 12

( Assessment Year 2008-09 )

Shri Prakash Laxminarayan   Vs. ACIT, Cir-5, Nagpur-440 001 

Soni,   74,   Shriniketan,   Ramdaspeth, Nagpur-12

P AN No . : AEWPS 2001 P

(Appellant)

..

AN D

( Respondent)

I T A N o.1 65/Nag/2012

( Ass ess me nt Year 2008-09 )

Shri Rahul Prakash Soni, 74, Shriniketan, Ramdaspeth, Nagpur-12

P AN No . : AETPS 696 5 H

Vs. ACIT, Cir-5, Nagpur-440 001

(Appellant)

Assessee by

Revenue by

Date of Hearing

Respondent)

Mr. Bhupendra Shah

Dr. Millind Bhusari

15thMarch., 2013

Date of Pronouncement :

O R D E R

Per Bench :

10th April, 2013

These two appeals have been preferred by two different  assessees before the ITAT Nagpur Bench, Nagpur, against the order  of leaned CIT(A)-II, Nagpur (Maharashtra) relating to assessment year  2008-09, which has been heard through E-Court, Mumbai.

2.   Since common issues are involved in both the cases, therefore,   for the sake of convenience, both these cases have been heard and  disposed of by this consolidated order. 

3.   In both the appeals, the aforesaid assessees have raised the   ground against the action of the learned CIT(A) in regard to confirming   the action of the AO in holding and maintaining that the agricultural  land held by these two assessees are capital asset within the meaning

  ITA Nos.164 & 165/Nag/2012   of Section2(14)(ii)(b) by adopting the ariel distance by straight line   method instead of road distance.

4.   Brief facts giving rising to both these appeals are that during the   course of assessment proceeding, the AO noted that these two  assessees have sold lands, in which they were having 1/4th share. The  lands were purchased on 17-8-2007 admeasuring 2.58 hectare, which  was sold on 31-1-2008 for a total consideration of Rs.1,88,13,156/-.   These two partners were having 1/4thshare in the above stated land   which was situated in Mouza Khadka village. The AO found that as per  the straightline method, the distance of the agricultural lands sold are  situated beyond 8 KMs from the Municipal Limits of the City of Nagpur.   Therefore, he viewed that the land in question is capital asset within  the meaning of Section 2(14)(iii)(b) of the Act. Accordingly, he brought   the gain to tax by computing capital gain.

5.   Being aggrieved, both these assessee preferred appeal before    the CIT(A), wherein the CIT(A) after passing a detailed order held that   the findings of the AO are correct. Hence, both these assessee are   now in appeals here before the Tribunal.

6.   Having heard the rival parties and perusing the material on    record, we found that on similar facts in case of Sanjay Nagorao  Paidlewar &  Nitish Rameshchandra Chordia Vs. ACIT, listed under   ITA Nos.112 &113/Nag/2012, which was decided on 22-3-2013,   wherein after considering the arguments of both the parties in detail, the  Tribunal has taken a view that the distance from municipal limit has to be   adopted by taking approach road distance and not on the basis of  straight-line method or crow's flight.The issue has been discussed at   great length and found that this is squarely covered by the decision of   various Hon'ble High Courts and various benches of the Tribunal. The  findings of the Tribunal have been recorded in para 9 to 21, which are as  under :-



"9. We have heard rival submissions and considered them carefully. We have also considered the written submissions filed on behalf of both the parties i.e. assessees and department and have also perused the relevant material on record, on which our attentions were drawn. We have also taken into consideration the various case laws relied upon by the learned AR as well as learned CIT DR. After considering the submission and perusing the material on record, we found that the issue in respect to whether the agricultural land in question is an asset within the meaning of Section 2(14) or not, have already been decided by the Hon'ble Punjab and Haryana High Court in the case of Satinder Pal Singh(Supra). This decision of the Hon'ble Punjab and Haryana High Court has been consistently followed by various benches of the Tribunal in various parts of the country. One of us has also taken into considering this issue while sitting in Jaipur Benches of  the Tribunal and found that the decision of the Hon'ble Punjab and Haryana High Court has to be followed and the distance has to measured through approach road and not through the crows flight  distance. The Hon'ble Punjab and Haryana High Court in the case of Satinder Pal Singh (supra) has held that the distance of  agricultural land belonging to the assessee within the meaning of Section2(14)(iii)(b) has to be measured in terms of approach road and not by a straight line distance on horizontal plane or as per  crows flight. Copy of the order is also placed in the compilation at pages 1 &2.

10. The contention raised by learned CIT(A) that the reckoning of urbanization as a factor for prescribing the distance is of significance which would yield to the principle of measuring distance in terms of approach road rather than by straight line on horizontal plane, this contention of learned CIT(A) has also been considered by the Hon'ble Punjab and Haryana High Court and has observed that the principle of measurement of distance is considered as straight line distance on horizontal plane or as per crow's flight then it would have no relationship with the statutory  requirement of keeping in view the extent of urbanization. Such a course would be illusory, which is in pursuance of the aforesaid provision that Notification No.9447 dated.6thJanuary, 1994 has been issued by the Central Government. In respect of the State of Punjab, at item No.18, the sub-division Khanna has been listed at serial No.19. It has inter alia been specified that area upto 2 kms.  from the municipal limits in all directions has to be regarded as    other than agricultural land. Once the stator guidance of taking into account the extent and scope of urbanization of the area has to be reckoned while issuing any such notification then it would be incongruous to the argument of the Revenue that the distance of land should be measured by the method of straight line on horizontal plane or as per crow's flight because any measurement by crow's flight is bound to ignore the urbanization which has taken place. The decision of the Mumbai Bench in the case of Laukik Developers Vs DCIT, reported in (2007) 108 TTJ (Mumbai) 364,  was also taken into consideration by the Hon'ble Punjab and Haryana High Court and found that the decision of the Tribunal has  attained finality.

11. In case of Laukik Developers (supra), the Mumbai Bench of the Tribunal has observed that once the principle of measuring distance has been settled namely that the distance of the agricultural land belonging to the assessee-respondent has to be measured in terms of by approach road and not by a straight line distance on horizontal plane or as per crow's flight. Accordingly, the  Hon'ble Punjab and Haryana High Court held that the distance has  to be measured by approach road and not by straight line distance on horizontal plane or as per crow's flight. In case of Laukik Developers (supra), the assessee disputed that the distance for  the purpose of Section 80IB(10) has to be measured through straight line distance on horizontal plane and not by approach road.  The Mumbai Bench of the Tribunal has held that the issue regarding distance to be measured with regard to road distance or a straight line distance is covered with the decision of the Pune Tribunal in the case of Mangalam Inorganics (P) Ltd (supra),  wherein it was held that the distance between the municipal limits  and assessee's industrial undertaking has to be measured having regard to the road distance and not as per the crow's flight i.e., a straight-line distance as canvassed by the Revenue.

12. In case of ITO Vs. Ashok Shukla, decided in ITA No.207/Indore/2012, for assessment year 2008-09, vide order dated 31-8-2012, the issue was in respect to whether the assessee was entitled to exemption from capital gain on sale of agricultural land. This issue was examined in detail and it was found that the Tehsildar and Patwari have given a report that the land in question was agricultural land and the distance is 9.7 kms from the municipal  limit. This distance was through the approach road and not by straight line distance method. Thereafter discussing the issue on merit and having taking into consideration the decision of the Tribunal in the case of Laukik Developers (supra) and considering the decision of the Hon'ble Gujarat High Court in the case of Balkrishna Hariballabhadas Vs. CIT, reported in 138 ITR 245,  which was relied upon by the learned DR and found that the measurement has to be adopted by the approach road and not by straight line method. Reliance was also placed on the decision of the Hon'ble Punjab andHaryana High Court in the case of Satinder Pal Singh (supra). 13. In case of ACIT Vs. M/s Shagun Infrastructure Pvt. Ltd., decided in ITA No.209/Nag/2009, for assessment year 2006-07, vide order dated 27-6-2011, the Nagpur Bench of the Tribunal has held that the land in question which was situated more than 8 kms.   from the local municipal limit and is clearly agricultural land in terms of Section 2(14)(iii) of the Act,, therefore, any income from such land including profit arising from sale of such agricultural land is not assessable as income.

14. In case of ACIT Vs. Gaurav Khandelwal, decided in ITA No.195/Agra/2010, for assessment year 2006-07, the Agra Bench of the Tribunal following the decision of Mumbai Bench in case of Laukik Developers (supra) and the decision of Hon'ble Punjab and Haryana High Court in the case of Satinder Pal Singh (supra), held that the distance of 8kms has to be measured by approach road distance and not by straight line distance on horizontal plane. Similar view has been expressed in case of Shri Mainraj Vs. ACIT, decided in ITA No.1371/Mds/2011, for assessment year 2007-08 vide order dated 18-8-2011. In this case also it has been held that the distance has to be measured by approach road and not through crow's flight or straight line method. In case of Smt. Savithri Ammal Vs. ITO, decided in ITA No.487/Mds/2012, vide order dated 12-7-2012 again it has been held that the distance has to be measured as per the approach road and not by straight line method. Similar view has been expressed in case of ITO Vs. Shri Chaganlal Lalji Aswin  Business, decided in ITA No.857/Mds/2011, for the assessment year 2007-08, vide order dated 18-2-2011. In case of ITO Vs. M/s Ranjit Rattan Mehra (HUF), decided in ITA No.442/Asr/2011 for  assessment year 2008-09, the Amritsar Bench of the Tribunal has  taken a view that the distance of 8 kms has to be measured through the approach road and not through the straight line method. While holding so, the decision of the Hon'ble Punjab and Haryana High Court in case of Satinder Pal Singh (supra), was taken into consideration and another decision of the same High Court in case of CIT Vs. Lal Singh & Others, reported in (2010) 228 CTR 575 was also taken into consideration and has allowed the issue in favour of the assessee by holding that the distance of 8km has to be measured through approach road and not by straight line method on horizontal plane.  15. We have also taken into consideration various arguments of learned CIT DR and found that since the issue is covered by the decision of the various Benches of the Tribunal as well by Hon'ble  Punjab and Haryana High Court, therefore, in view of the consistency the view taken by various benches has to be followed. There is no contrary decision is available on the same facts and, therefore, it cannot be said that the decision of the Hon'ble Punjab and Haryana High Court has only persuasive value. If there is any contrary decision is available either by the Hon'ble High Court or by  any other benches of the Tribunal, then of course it can be said that the decision of other benches have persuasive value. In view of the aforesaid facts and circumstances of the case, we held that distance of 8 kms. has to be measured through approach road and not by straight line distance on horizontal plane or crow's flight. Hence, this issue is decided in favour of the assessees. 

16. Regarding the issue in regard to whether the sale consideration out of agricultural income is assessable as business income or not, once we have held that this was an agricultural land and, therefore, any consideration out of sale of agricultural land, which is not assessable as the land was situated beyond 8 kms., therefore, the direction of the learned CIT(A) that the surplus may  be treated as business income, has become now meaningless. Even and otherwise, this issue is also decided by various High Courts including the Hon'ble Bombay High Court. Though learned CIT(A) has placed reliance on the decision of the Hon'ble Bombay High Court in case of Gopal Ramnarayan Kasat, reported in 9  Taxman.com 236 (Bom), however, in a latest decision the Hon'ble  Bombay High Court in the case of CIT Vs. Smt. Debbie Alemao, reported in (2011) 331 ITR 59, has held that the land which was shown as agricultural land in the revenue records and never sought to be used for non-agricultural purposes by the assessee till it was sold has to be treated as agricultural land, even though no agricultural income was shown by the assessee from this land and, therefore, no capital gain was taxable on the sale of the said land.

17. Facts in the case in hand are similar. The land in question was shown as agricultural land in the revenue record. Whether there was any agricultural income or not, is not the moot question to decide the issue, however, the important factor is to be decided as to whether the character of the land is agriculture or not.  Undisputedly, in the revenue record and as per the Patwari certificate, the land in question is agricultural land. Therefore, the sale consideration was not taxable on the sale of said land i.e. either on account of capital gain or on account of business income. 

18. Even we found that this issue has been decided by the Hon'ble Apex Court while confirming the order of the Hon'ble Delhi  High Court in the case of DLF United Limited, 217 ITR 337. The facts in the case of DLF United Limited (supra) were that the DLF limited purchased agricultural land from various farmers in the ear and shown exemption, however, the AO treated the sale consideration as revenue receipt. Upto the stage of Tribunal, the order of AO was confirmed, however, the Hon'ble Delhi High Court held that the land in question was of agricultural land and therefore, any receipt on account of sale of agricultural land is not taxable. This decision of the Hon'ble Delhi High Court has been confirmed by the Hon'ble Apex Court, whereby it has been held that even and otherwise we see no merit in the Special Leave Petition and the same are accordingly dismissed on the ground of delay as well as on merits. Copies of these orders are placed in the compilation.

19. This issue has also been considered in various other decision i.e. in case of Hindustan Industrial Resources Limited Vs. ACIT, reported in 335 ITR 77, wherein it was held that in view  of the finding of the Tribunal that the land in question was agricultural land at the time of purchase by the assessee as also at the time of acquisition, the land was clearly agricultural land irrespective of the fact that the assessee intended to use the land for industrial purposes and did not carry out any agricultural operations and, therefore, no capital gains could be charged on acquisition thereof under the Land Acquisition Act, 1894. While holding so, the decision in the case of DLF United Limited  (supra), was taken into consideration by the Hon'ble Delhi High Court.

20. In case of Shri Satyanarayan O. Agrawal Vs. ADCIT,  decided in ITA No.169/Nag/2012 for assessment year 2007-08, similar view also was taken following the various case laws and ultimately it was held that the consideration received out of sale of agricultural land was not taxable.

21. Since this issue has already been decided by various benches of the Tribunal and the Hon'ble Bombay High Court as well as the Hon'ble Delhi High Court and the decision of the Hon'ble Delhi High Court in the case of DLF United Limited (supra), which has been confirmed by the Hon'ble Supreme Court,  therefore, we hold that any consideration received out of sale of agricultural land, cannot be treated as business income for the purpose of capital gain or for the purpose of business income,  whatever the case may be. In view of the aforesaid facts and circumstances of the case, we allow this ground in favour of all the assessees."

Since facts are similar, therefore, following the above decision of   the Tribunal in the case of Sanjay Nagorao Paidlewar & Nitish  Rameshchandra Chordia Vs. ACIT, listed under ITA Nos.112 &   113/Nag/2012, decided on 22-3-2013, we allow this ground of these  two assessees in both the appeals by holding that the distance of 8km  has to be measured through approach road and not by straight line  method on horizontal plane and if through approach road the distance  is taken, then it is seen that the distance is beyond 8 km from the  municipal limit. Accordingly, we hold that no capital gain is payable as  the agricultural land sold is not a capital asset within the meaning of  Section 2(14)(iii)(b) of the Act.

Resultantly, appeals of both the assessees are allowed.

Order pronounced in the open court on this 10thday of Apr. 2013.

Sd/-                                           Sd/-

(D.KARUNAKARA RAO) (R.K.GUPTA)

ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai; Dated :

pkm, PS

10/04/ 2013.

Copy of the Order forwarded to :

1. The Appellant

2. The Respondent.

3. The CIT(A),Nagpur.

4. CIT

5. DR, ITAT, Mumbai/Nagpur

6. Guard file.

//True Copy//

8

ITA Nos.164 &165/Nag/2012

BY ORDER,

(Asstt. Registrar)

ITAT, Mumbai

CLARIFICATION ON POINT OF TAXATION RULES IN RELATION TO AIRLINES CIRCULAR NO.155

CLARIFICATION ON POINT OF TAXATION RULES IN RELATION TO AIRLINES
CIRCULAR NO.155/6/2012 - ST, DATED 9-4-2012

1. Notification No. 2/2012 - Service Tax dated the 17th March, 2012 has rescinded Notification No. 8/2009 - Service Tax, dated the 24th February, 2009, thus restoring the effective rate of service tax to 12% wef 1st April, 2012. Further the Notification No. 26/2010-Service Tax, dated the 22nd June, 2010 has been superseded by Notification No. 6/2012 - Service Tax dated the 17th March, 2012, wef 1st April, 2012.
2. It has been brought to the attention of the Board that some airlines are collecting differential service tax on tickets issued before 1st April, 2012 for journey after 1st April, 2012, causing inconvenience to passengers. Representations have also been received in this regard. The position of law in the above respect is clear and is detailed below.
3. Rule 4 of the Point of Taxation Rules, 2011 deals with the situations of change in effective rate of tax. In case of airline industry, the ticket so issued in any form is recognised as an invoice by virtue of proviso to rule 4A of Service Tax Rules, 1994. Usually in case of online ticketing and counter sales by the airlines, the payment for the ticket is received before the issuance of the ticket. Rule 4(b)(ii) of the Point of Taxation Rules, 2011 addresses such situations and accordingly the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier. Thus the service tax shall be charged @10% subject to applicable exemptions plus cesses in case of tickets issued before 1st April, 2012 when the payment is received before 1st April, 2012.
4. In case of sales through agents (IATA or otherwise including online sales and sales through GSA) the payment is received by the agent and remitted to airlines after some time. When the relationship between the airlines and such agents is that of principal and agent in terms of the Indian Contract Act, 1872, the payment to the agent is considered as payment to the principal. Accordingly as per Rule 4(b)(ii), the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier. Thus the service tax shall be charged @10% subject to applicable exemptions plus cesses in case of tickets issued before 1st April, 2012 when the payment is received before 1st April, 2012 by the agent.
5. However, to the extent airlines have already collected extra amount as service tax and do not refund the same to the customers, such amount will be required to be paid to the credit of the Central Government under section 73A of the Finance Act, 1994 (as amended).
6. Trade Notice/Public Notice may be issued to the field formations accordingly.

Proviso inserted in section 92C(2) by Finance (No. 2) Act, 2009 with effect from 1-10-2009, would not apply to an assessment year prior to its insertion [2012] 20 taxmann 131

Proviso inserted in section 92C(2) by Finance (No. 2) Act, 2009 with effect from 1-10-2009, would not apply to an assessment year prior to its insertion

[2012] 20 taxmann.com 131 (Bangalore - Trib.)
IN THE ITAT BANGALORE BENCH 'A'

Tatra Vectra Motors Ltd. v. Deputy Commissioner of Income-tax, Circle 12(4), Bangalore

CBDT Notification. Tolerance limit in Arm's length price

SECTION 92C OF THE INCOME-TAX ACT, 1961 - TRANSFER PRICING - COMPUTATION OF ARM’S LENGTH PRICE - NOTIFIED TOLERABLE LIMIT FOR DETERMINATION OF ALP

NOTIFICATION NO. 30/2013 [F.NO.500/185/2011-FTD-I], DATED 15-4-2013

In exercise of the powers conferred by the second proviso to sub-section (2) of section 92C of the Income Tax Act, 1961 (43 of 1961), the Central Government hereby notifies that where the variation between the arm's length price determined under section 92C and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed one per cent of the latter for wholesale traders and three per cent of the latter in all other cases, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm's length price for assessment year 2013-14.

153C : certain conditions precedent are to be followed and they are mandatory

Commissioner of Income Tax v Classic Enterprises Cantt Road Lucknow,

Revenue; Search and seizure — Search conducted on other person — Assessment in respect of third person in respect of whom search has not been conducted — Permissibility — Assessee was registered firm consisting of two partners — Search was conducted in business premises of assessee and its partner — Books were handed over to AO and AO passed notice under s 153C — CIT(A) quashed assessment order — Tribunal also dismissed Revenue's appeal — Held, in order to initiate block assessment proceedings against third person in respect of whom search has not been conducted, certain conditions precedent are to be followed and they are mandatory — Satisfaction by its very nature must precede before papers are sent by AO of person searched to AO of third person — Mere use or mention of word satisfaction in order would not meet requirement of concept of satisfaction as used in s 158BD — Satisfaction has to be in writing and can be gathered from assessment order, if it is so mentioned, or from any other order, note or record maintained by AO of person searched — It refers to state of mind of AO of person searched, which is reflected in tangible form when it is reduced to writing — AO is satisfied when he makes up his mind or reaches clear conclusion when he takes prima facie view that material available establishes "undisclosed income" of third party — At this stage, as proceedings are at very initial state, "satisfaction" is neither required to be firm or conclusive — "Satisfaction" required is to decide whether or not block assessment proceedings are required to be initiated — But "satisfaction" has to be founded on reasonableness — Satisfaction must reflect rational connection with or relevant bearing between material available and undisclosed income of third person — F urther, it was held that there was no necessity for transferring file from one officer to another, in case where person searched was partner and based on materials gathered during search assessment was made by same officer on assessee-firm, wherein searched assessee was partner — So much so, issuance of notice under s 158BD read with s 158BC was sufficient for initiation of assessment — In light of above discussion and considering totality of facts and circumstances of case, no reason was found to sustain order passed by Tribunal — Order passed by Tribunal set aside — Matter remanded back to Tribunal, directing to decide all appeals strictly on merits expeditiously.

How to measure Agricultural Land u/s 2(14)(ii)(b)?

IN THE INCOME TAX APPELLATE TRIBUNAL "NAGPUR", BENCH,  (E-COURT), MUMBAI
BEFORE SHRI R.K.GUPTA, JM & SHRI D.KARUNAKARA RAO, AM

I T A N o.1 64/Nag/ 20 12
( Ass ess me nt Year 2008-09 )
Shri Prakash Laxminarayan   Vs. ACIT, Cir-5, Nagpur-440 001 
Soni,   74,   Shriniketan,   Ramdaspeth, Nagpur-12
P AN No . : AEWPS 2001 P
(Appellant)

..

AN D
( Respondent)
I T A N o.1 65/Nag/2012
( Ass ess me nt Year 2008-09 )
Shri Rahul Prakash Soni, 74, Shriniketan, Ramdaspeth, Nagpur-12
P AN No . : AETPS 696 5 H
Vs. ACIT, Cir-5, Nagpur-440 001
(Appellant)
Assessee by
Revenue by
Date of Hearing
Respondent)

Mr. Bhupendra Shah

Dr. Millind Bhusari

15thMarch., 2013

Date of Pronouncement :

O R D E R

Per Bench :

10th April, 2013

These two appeals have been preferred by two different  assessees before the ITAT Nagpur Bench, Nagpur, against the order  of leaned CIT(A)-II, Nagpur (Maharashtra) relating to assessment year  2008-09, which has been heard through E-Court, Mumbai.

2.   Si n c e common issues are involved in both the cases, therefore,   for the sake of convenience, both these cases have been heard and  disposed of by this consolidated order.

3.   In both the appeals, the aforesaid assessees have raised the   ground against the action of the learned CIT(A) in regard to confirming   the action of the AO in holding and maintaining that the agricultural  land held by these two assessees are capital asset within the meaning

  ITA Nos.164 &165/Nag/2012   of Section2(14)(ii)(b) by adopting the ariel distance by straight line   method instead of road distance.

4.   Brief facts giving rising to both these appeals are that during the   course of assessment proceeding, the AO noted that these two  assessees have sold lands, in which they were having 1/4th share. The  lands were purchased on 17-8-2007 admeasuring 2.58 hectare, which  was sold on 31-1-2008 for a total consideration of Rs.1,88,13,156/-.   These two partners were having 1/4thshare in the above stated land   which was situated in Mouza Khadka village. The AO found that as per  the straightline method, the distance of the agricultural lands sold are  situated beyond 8 KMs from the Municipal Limits of the City of Nagpur.   Therefore, he viewed that the land in question is capital asset within  the meaning of Section 2(14)(iii)(b) of the Act. Accordingly, he brought   the gain to tax by computing capital gain.

5.   Being aggrieved, both these assessee preferred appeal before    the CIT(A), wherein the CIT(A) after passing a detailed order held that   the findings of the AO are correct. Hence, both these assessee are   now in appeals here before the Tribunal.

6.   Having heard the rival parties and perusing the material on    record, we found that on similar facts in case of Sanjay Nagorao  Paidlewar & Nitish Rameshchandra Chordia Vs. ACIT, listed under   ITA Nos.112 & 113/Nag/2012, which was decided on 22-3-2013,   wherein after considering the arguments of both the parties in detail, the  Tribunal has taken a view that the distance from municipal limit has to be   adopted by taking approach road distance and not on the basis of  straight-line method or crow's flight.The issue has been discussed at   great length and found that this is squarely covered by the decision of   various Hon'ble High Courts and various benches of the Tribunal. The  findings of the Tribunal have been recorded in para 9 to 21, which are as  under :-

"9. We have heard rival submissions and considered them carefully. We have also considered the written submissions filed on behalf of both the parties i.e. assessees and department and have also perused the relevant material on record, on which our attentions were drawn. We have also taken into consideration the various case laws relied upon by the learned AR as well as learned CIT DR. After considering the submission and perusing the material on record, we found that the issue in respect to whether the agricultural land in question is an asset within the meaning of Section 2(14) or not, have already been decided by the Hon'ble Punjab and Haryana High Court in the case of Satinder Pal Singh(Supra). This decision of the Hon'ble Punjab and Haryana High Court has been consistently followed by various benches of the Tribunal in various parts of the country. One of us has also taken into considering this issue while sitting in Jaipur Benches of  the Tribunal and found that the decision of the Hon'ble Punjab and Haryana High Court has to be followed and the distance has to measured through approach road and not through the crows flight  distance. The Hon'ble Punjab and Haryana High Court in the case of Satinder Pal Singh (supra) has held that the distance of  agricultural land belonging to the assessee within the meaning of Section2(14)(iii)(b) has to be measured in terms of approach road and not by a straight line distance on horizontal plane or as per  crows flight. Copy of the order is also placed in the compilation at pages 1 & 2.

10. The contention raised by learned CIT(A) that the reckoning of urbanization as a factor for prescribing the distance is of significance which would yield to the principle of measuring distance in terms of approach road rather than by straight line on horizontal plane, this contention of learned CIT(A) has also been considered by the Hon'ble Punjab and Haryana High Court and has observed that the principle of measurement of distance is considered as straight line distance on horizontal plane or as per crow's flight then it would have no relationship with the statutory  requirement of keeping in view the extent of urbanization. Such a course would be illusory, which is in pursuance of the aforesaid provision that Notification No.9447 dated.6thJanuary, 1994 has been issued by the Central Government. In respect of the State of Punjab, at item No.18, the sub-division Khanna has been listed at serial No.19. It has inter alia been specified that area upto 2 kms.  from the municipal limits in all directions has to be regarded as    other than agricultural land. Once the stator guidance of taking into account the extent and scope of urbanization of the area has to be reckoned while issuing any such notification then it would be incongruous to the argument of the Revenue that the distance of land should be measured by the method of straight line on horizontal plane or as per crow's flight because any measurement by crow's flight is bound to ignore the urbanization which has taken place. The decision of the Mumbai Bench in the case of Laukik Developers Vs DCIT, reported in (2007) 108 TTJ (Mumbai) 364,  was also taken into consideration by the Hon'ble Punjab and Haryana High Court and found that the decision of the Tribunal has  attained finality.

11. In case of Laukik Developers (supra), the Mumbai Bench of the Tribunal has observed that once the principle of measuring distance has been settled namely that the distance of the agricultural land belonging to the assessee-respondent has to be measured in terms of by approach road and not by a straight line distance on horizontal plane or as per crow's flight. Accordingly, the  Hon'ble Punjab and Haryana High Court held that the distance has  to be measured by approach road and not by straight line distance on horizontal plane or as per crow's flight. In case of Laukik Developers (supra), the assessee disputed that the distance for  the purpose of Section 80IB(10) has to be measured through straight line distance on horizontal plane and not by approach road.  The Mumbai Bench of the Tribunal has held that the issue regarding distance to be measured with regard to road distance or a straight line distance is covered with the decision of the Pune Tribunal in the case of Mangalam Inorganics (P) Ltd (supra),  wherein it was held that the distance between the municipal limits  and assessee's industrial undertaking has to be measured having regard to the road distance and not as per the crow's flight i.e., a straight-line distance as canvassed by the Revenue.

12. In case of ITO Vs. Ashok Shukla, decided in ITA No.207/Indore/2012, for assessment year 2008-09, vide order dated 31-8-2012, the issue was in respect to whether the assessee was entitled to exemption from capital gain on sale of agricultural land. This issue was examined in detail and it was found that the Tehsildar and Patwari have given a report that the land in question was agricultural land and the distance is 9.7 kms from the municipal  limit. This distance was through the approach road and not by straight line distance method. Thereafter discussing the issue on merit and having taking into consideration the decision of the Tribunal in the case of Laukik Developers (supra) and considering the decision of the Hon'ble Gujarat High Court in the case of Balkrishna Hariballabhadas Vs. CIT, reported in 138 ITR 245,  which was relied upon by the learned DR and found that the measurement has to be adopted by the approach road and not by straight line method. Reliance was also placed on the decision of the Hon'ble Punjab andHaryana High Court in the case of Satinder Pal Singh (supra). 13. In case of ACIT Vs. M/s Shagun Infrastructure Pvt. Ltd., decided in ITA No.209/Nag/2009, for assessment year 2006-07, vide order dated 27-6-2011, the Nagpur Bench of the Tribunal has held that the land in question which was situated more than 8 kms.   from the local municipal limit and is clearly agricultural land in terms of Section 2(14)(iii) of the Act,, therefore, any income from such land including profit arising from sale of such agricultural land is not assessable as income.

14. In case of ACIT Vs. Gaurav Khandelwal, decided in ITA No.195/Agra/2010, for assessment year 2006-07, the Agra Bench of the Tribunal following the decision of Mumbai Bench in case of Laukik Developers (supra) and the decision of Hon'ble Punjab and Haryana High Court in the case of Satinder Pal Singh (supra), held that the distance of 8kms has to be measured by approach road distance and not by straight line distance on horizontal plane. Similar view has been expressed in case of Shri Mainraj Vs. ACIT, decided in ITA No.1371/Mds/2011, for assessment year 2007-08 vide order dated 18-8-2011. In this case also it has been held that the distance has to be measured by approach road and not through crow's flight or straight line method. In case of Smt. Savithri Ammal Vs. ITO, decided in ITA No.487/Mds/2012, vide order dated 12-7-2012 again it has been held that the distance has to be measured as per the approach road and not by straight line method. Similar view has been expressed in case of ITO Vs. Shri Chaganlal Lalji Aswin  Business, decided in ITA No.857/Mds/2011, for the assessment year 2007-08, vide order dated 18-2-2011. In case of ITO Vs. M/s Ranjit Rattan Mehra (HUF), decided in ITA No.442/Asr/2011 for  assessment year 2008-09, the Amritsar Bench of the Tribunal has  taken a view that the distance of 8 kms has to be measured through the approach road and not through the straight line method. While holding so, the decision of the Hon'ble Punjab and Haryana High Court in case of Satinder Pal Singh (supra), was taken into consideration and another decision of the same High Court in case of CIT Vs. Lal Singh & Others, reported in (2010) 228 CTR 575 was also taken into consideration and has allowed the issue in favour of the assessee by holding that the distance of 8km has to be measured through approach road and not by straight line method on horizontal plane.  15. We have also taken into consideration various arguments of learned CIT DR and found that since the issue is covered by the decision of the various Benches of the Tribunal as well by Hon'ble  Punjab and Haryana High Court, therefore, in view of the consistency the view taken by various benches has to be followed. There is no contrary decision is available on the same facts and, therefore, it cannot be said that the decision of the Hon'ble Punjab and Haryana High Court has only persuasive value. If there is any contrary decision is available either by the Hon'ble High Court or by  any other benches of the Tribunal, then of course it can be said that the decision of other benches have persuasive value. In view of the aforesaid facts and circumstances of the case, we held that distance of 8 kms. has to be measured through approach road and not by straight line distance on horizontal plane or crow's flight. Hence, this issue is decided in favour of the assessees. 

16. Regarding the issue in regard to whether the sale consideration out of agricultural income is assessable as business income or not, once we have held that this was an agricultural land and, therefore, any consideration out of sale of agricultural land, which is not assessable as the land was situated beyond 8 kms., therefore, the direction of the learned CIT(A) that the surplus may  be treated as business income, has become now meaningless. Even and otherwise, this issue is also decided by various High Courts including the Hon'ble Bombay High Court. Though learned CIT(A) has placed reliance on the decision of the Hon'ble Bombay High Court in case of Gopal Ramnarayan Kasat, reported in 9  Taxman.com 236 (Bom), however, in a latest decision the Hon'ble  Bombay High Court in the case of CIT Vs. Smt. Debbie Alemao, reported in (2011) 331 ITR 59, has held that the land which was shown as agricultural land in the revenue records and never sought to be used for non-agricultural purposes by the assessee till it was sold has to be treated as agricultural land, even though no agricultural income was shown by the assessee from this land and, therefore, no capital gain was taxable on the sale of the said land.

17. Facts in the case in hand are similar. The land in question was shown as agricultural land in the revenue record. Whether there was any agricultural income or not, is not the moot question to decide the issue, however, the important factor is to be decided as to whether the character of the land is agriculture or not.  Undisputedly, in the revenue record and as per the Patwari certificate, the land in question is agricultural land. Therefore, the sale consideration was not taxable on the sale of said land i.e. either on account of capital gain or on account of business income. 

18. Even we found that this issue has been decided by the Hon'ble Apex Court while confirming the order of the Hon'ble Delhi  High Court in the case of DLF United Limited, 217 ITR 337. The facts in the case of DLF United Limited (supra) were that the DLF limited purchased agricultural land from various farmers in the ear and shown exemption, however, the AO treated the sale consideration as revenue receipt. Upto the stage of Tribunal, the order of AO was confirmed, however, the Hon'ble Delhi High Court held that the land in question was of agricultural land and therefore, any receipt on account of sale of agricultural land is not taxable. This decision of the Hon'ble Delhi High Court has been confirmed by the Hon'ble Apex Court, whereby it has been held that even and otherwise we see no merit in the Special Leave Petition and the same are accordingly dismissed on the ground of delay as well as on merits. Copies of these orders are placed in the compilation.

19. This issue has also been considered in various other decision i.e. in case of Hindustan Industrial Resources Limited Vs. ACIT, reported in 335 ITR 77, wherein it was held that in view  of the finding of the Tribunal that the land in question was agricultural land at the time of purchase by the assessee as also at the time of acquisition, the land was clearly agricultural land irrespective of the fact that the assessee intended to use the land for industrial purposes and did not carry out any agricultural operations and, therefore, no capital gains could be charged on acquisition thereof under the Land Acquisition Act, 1894. While holding so, the decision in the case of DLF United Limited  (supra), was taken into consideration by the Hon'ble Delhi High Court.

20. In case of Shri Satyanarayan O. Agrawal Vs. ADCIT,  decided in ITA No.169/Nag/2012 for assessment year 2007-08, similar view also was taken following the various case laws and ultimately it was held that the consideration received out of sale of agricultural land was not taxable.

21. Since this issue has already been decided by various benches of the Tribunal and the Hon'ble Bombay High Court as well as the Hon'ble Delhi High Court and the decision of the Hon'ble Delhi High Court in the case of DLF United Limited (supra), which has been confirmed by the Hon'ble Supreme Court,  therefore, we hold that any consideration received out of sale of agricultural land, cannot be treated as business income for the purpose of capital gain or for the purpose of business income,  whatever the case may be. In view of the aforesaid facts and circumstances of the case, we allow this ground in favour of all the assessees."

Since facts are similar, therefore, following the above decision of   the Tribunal in the case of Sanjay Nagorao Paidlewar & Nitish  Rameshchandra Chordia Vs. ACIT, listed under ITA Nos.112 &   113/Nag/2012, decided on 22-3-2013, we allow this ground of these  two assessees in both the appeals by holding that the distance of 8km  has to be measured through approach road and not by straight line  method on horizontal plane and if through approach road the distance  is taken, then it is seen that the distance is beyond 8 km from the  municipal limit. Accordingly, we hold that no capital gain is payable as  the agricultural land sold is not a capital asset within the meaning of  Section 2(14)(iii)(b) of the Act.

Resultantly, appeals of both the assessees are allowed.

Order pronounced in the open court on this 10thday of Apr. 2013.

Sd/-                                           Sd/-

(D.KARUNAKARA RAO) (R.K.GUPTA)

ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai; Dated :

pkm, PS

10/04/ 2013.

Copy of the Order forwarded to :

1. The Appellant

2. The Respondent.

3. The CIT(A),Nagpur.

4. CIT

5. DR, ITAT, Mumbai/Nagpur

6. Guard file.

//True Copy//

8

ITA Nos.164 &165/Nag/2012

BY ORDER,

(Asstt. Registrar)

ITAT, Mumbai

COMPLEX WEB OF TRANSACTIONS A Multi-Starrer Tax Evasion Plot Stumps

COMPLEX WEB OF TRANSACTIONS
A Multi-Starrer Tax Evasion Plot Stumps I-T Dept

Diamond houses,traders,realtors and petty assistants join hands to evade tax

SUGATA GHOSH & M PADMAKSHAN MUMBAI

When officials of the Mumbai income-tax investigation wing stumbled upon a handful of bank accounts with wild entries,they first thought these were typical money-laundering deals one associates with the seedy underbelly of the financial capital.But as they dug deeper into the money flow,they could slowly piece together an amazing web of transactions that involved diamond houses,construction firms,local traders and an army of lackeys who do nothing other than lending their names for small money.These disparate players come together in circuitous transactions that are carried out to escape tax as well as funnel unaccounted cash into audited accounts of regular businesses.It took us a while to get the complete pictureWe have our eyes on some people.The investigation is on, said a senior official of the Income-Tax Department.The chain starts with some diamond firms that regularly import rough stones on 3-6 months credit.But the simple trade is done differently.The import lands in five consignments: on paper,only one of these is linked to the diamond houses.The other four consignments are received by four assistants of the diamond firm.These assistants,who do not have the means and creditworthiness to import,act as fronts for the diamantaire.Once Customs formalities are over and the assistants take delivery of the diamonds,the stones are handed over to the diamond house,which pays them nothing but a small fee for their services.The four assistants (or the fronts),on the other hand,do not have physical diamond in their possession,but have diamonds on the books of their entities that have acted as importers on behalf of the real diamond company.For the diamond house,its a ploy to lower turnover and evade tax in future.But the chain of transaction does not end here.

QUID PRO QUO WTH LOCAL TRADERS

The next set of players that participates in the transaction is local traders and jewellers who typically use cash to buy diamonds.

ITR Volume 352 Part 3 (Issue dated 22-4-2013)

INCOME TAX REPORTS (ITR)

Volume 352 Part 3 (Issue dated 22-4-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Capital gains --Business income--Trading or investment--Long-term capital gains--Assessee treating land as fixed asset for a long time and using it for agricultural purposes--No evidence that assessee purchased land by funds borrowed--Sale proceeds resulting long-term capital gains and not business income--Income-tax Act, 1961-- CIT v. Delhi Apartments Pvt. Ltd. (Delhi) . . . 322

Capital or revenue expenditure --Company--Expenditure on debenture--Debenture to be converted subsequently to shares--Expenditure deductible--Income-tax Act, 1961, s. 37-- CIT v . Havells India Ltd . (Delhi) . . . 376

----Expenditure on installation of new unit--Finding that new unit constituted extension of existing business and there was common management--Expenditure deductible--Income-tax Act, 1961, s. 37-- CIT v. Havells India Ltd .

(Delhi) . . . 376

----Expenditure relating to voluntary retirement scheme in respect of two units of assessee--Closure of two units not resulting in closure of business of assessee--Expenditure incurred for purpose of restructuring to achieve modernisation--Allowable as revenue expenditure--Income-tax Act, 1961, s. 37(1)-- CIT v. Foseco India Ltd .

(Bom) . . . 320

Deduction of tax at source --Non-resident--Effect of section 9(1)(vii)(b)--Meaning of source of income--Manufacture of products in India--Payment to US company for certification facilitating export--Source of income within India--Section 9(1)(vii) applicable--Question of liability under DTAA between USA and India not considered--Matter remanded--Income-tax Act, 1961, ss. 9(1)(vii), 40(a)(ia), 195-- CIT v . Havells India Ltd. (Delhi) . . . 376

Exemption --Educational institution--Denial of exemption under section 10(23C)(vi)--Registration under section 12A cannot be cancelled on basis of order denying exemption--Exemption can be claimed without applying for registration--Both are independent proceedings--Income-tax Act, 1961, ss. 10(23C)(vi), 12A-- CIT v . Society of Advanced Management Studies (All) . . . 269

Export --Special deduction--Different units of assessee engaged in manufacturing of different goods--Does not make separate units of assessee separate and different assessable units--Loss of one division to be adjusted against profit of other division for purposes of computation of deduction under section 80HHC--Income-tax Act, 1961, s. 80HHC-- Madhav Marbles and Granites Ltd. v. Asst. CIT (Raj) . . . 331

Income --Accrual of income--No transfer of possession during previous year relevant to assessment year 2006-07 but only receipt of advance--Execution of sale deed in following year--Amount received as advance not taxable in assessment year 2006-07--Income-tax Act, 1961-- CIT v . Delhi Apartments Pvt. Ltd . (Delhi) . . . 322

Penalty --Concealment of income--Transactions disclosed in return--Claim of expenditure to be revenue--Disallowance of claim--Assessee not liable for penalty--Income-tax Act, 1961, s. 271(1)(c)-- CIT v . Amtek Auto Ltd . (P&H) . . . 394

----Deposit in cash exceeding prescribed limit--Limitation--Six months from date of initiation of action for levy of penalty--Period to be reckoned from date of issue of first show cause for penalty and not from issue of first show cause by Joint Commissioner--Income-tax Act, 1961, ss. 269SS, 271D, 275(1)(c)-- CIT v . Jitendra Singh Rathore

(Raj) . . . 327

Reassessment --Limitation--Requirements only that reasons be recorded and notice be issued before expiry of time limit--Delay in supplying reasons recorded by Assessing Officer to assessee would not invalidate reassessment proceedings--Income-tax Act, 1961, ss. 147, 148, 149-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

----Notice--Validity--Original assessment granting special deduction under section 80-IA(4) after detailed enquiry--Reassessment proceedings to withdraw special deduction on ground that assessee not entitled to special deduction--Mere change of opinion--Notice not valid--Income-tax Act, 1961, ss. 80-IA, 147, 148-- Parixit Industries P. Ltd . v . Asst. CIT (OSD) (Guj) . . . 349

----Notice after four years--Conditions precedent--Information regarding transport subsidy available in audited accounts and statements furnished by assessee to Assessing Officer with assessee’s return--Reassessment adding transport subsidy as taxable income of assessee--Not valid--Income-tax Act, 1961, ss. 147, 148-- CIT v. Sonitpur Solvex Ltd. (Gauhati) . . . 305

----Notice after four years--Failure by assessee to disclose material facts--Documents attached to return only statutory auditor’s report and final accounts--Nothing disclosing specifically receipt of share capital of Rs. 4,50,000 from Q--Report of investigation wing on basis of which assessment reopened containing specific information that assessee received as accommodation entry Rs. 4,50,000 from Q with bank account particulars and instrument number--Reopening of assessment proper--Income-tax Act, 1961, ss. 147, 148-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

Recovery of tax --Provisional attachment--Assessment thereafter completed--Revenue not justified in attaching entire amount standing to the credit of assessee over and above demand raised against assessee--Income-tax Act, 1961, s. 281B-- Nirmal Singh v . Union of India (P&H) . . . 396

Return of income --Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes--Income-tax Act, 1961, ss. 143(1), 154, 201, 203, 244A, 245-- Court on its own Motion v . CIT

(Delhi) . . . 273

Revision --Commissioner--Powers--

Rectification of mistakes--Order rejecting application in absence of revised return--Natural justice--Non-speaking order rejecting revision on ground of availability of alternative remedy of appeal not valid--Commissioner to decide petition on merits--Income-tax Act, 1961, ss. 154, 263-- Universal Packaging v. CIT (Bom) . . . 398

Search and seizure --Refund of excess amounts seized--Interest on refund--Period for which interest payable--Refund as a result of appellate order--Interest payable from date of original assessment order--Adjustment of tax liability of brother of assessee not justified--Assessee entitled to interest for amount seized--Income-tax Act, 1961, s. 132B(3)-- G. L. Jain v . CIT (Delhi) . . . 339

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 9(1)(vii) --Deduction of tax at source--Non-resident--Effect of section 9(1)(vii)(b)--Meaning of source of income--Manufacture of products in India--Payment to US company for certification facilitating export--Source of income within India--Section 9(1)(vii) applicable--Question of liability under DTAA between USA and India not considered--Matter remanded-- CIT v . Havells India Ltd. (Delhi) . . . 376

S. 10(23C)(vi) --Exemption--Educational institution--Denial of exemption under section 10(23C)(vi)--Registration under section 12A cannot be cancelled on basis of order denying exemption--Exemption can be claimed without applying for registration--Both are independent proceedings-- CIT v . Society of Advanced Management Studies (All) . . . 269

S. 12A --Exemption--Educational institution--Denial of exemption under section 10(23C)(vi)--Registration under section 12A cannot be cancelled on basis of order denying exemption--Exemption can be claimed without applying for registration--Both are independent proceedings-- CIT v . Society of Advanced Management Studies
(All) . . . 269

S. 37 --Capital or revenue expenditure--Company--Expenditure on debenture--Debenture to be converted subsequently to shares--Expenditure deductible-- CIT v . Havells India Ltd . (Delhi) . . . 376

----Capital or revenue expenditure--Expenditure on installation of new unit--Finding that new unit constituted extension of existing business and there was common management--Expenditure deductible-- CIT v. Havells India Ltd . (Delhi) . . . 376

S. 37(1) --Capital or revenue expenditure--Expenditure relating to voluntary retirement scheme in respect of two units of assessee--Closure of two units not resulting in closure of business of assessee--Expenditure incurred for purpose of restructuring to achieve modernisation--Allowable as revenue expenditure-- CIT v. Foseco India Ltd .
(Bom) . . . 320

S. 40(a)(ia) --Deduction of tax at source--Non-resident--Effect of section 9(1)(vii)(b)--Meaning of source of income--Manufacture of products in India--Payment to US company for certification facilitating export--Source of income within India--Section 9(1)(vii) applicable--Question of liability under DTAA between USA and India not considered--Matter remanded-- CIT v . Havells India Ltd. (Delhi) . . . 376

S. 80HHC --Export--Special deduction--Different units of assessee engaged in manufacturing of different goods--Does not make separate units of assessee separate and different assessable units--Loss of one division to be adjusted against profit of other division for purposes of computation of deduction under section 80HHC-- Madhav Marbles and Granites Ltd. v. Asst. CIT (Raj) . . . 331

S. 80-IA --Reassessment--Notice--Validity--Original assessment granting special deduction under section 80-IA(4) after detailed enquiry--Reassessment proceedings to withdraw special deduction on ground that assessee not entitled to special deduction--Mere change of opinion--Notice not valid-- Parixit Industries P. Ltd . v . Asst. CIT (OSD) (Guj) . . . 349

S. 132B(3) --Search and seizure--Refund of excess amounts seized--Interest on refund--Period for which interest payable--Refund as a result of appellate order--Interest payable from date of original assessment order--Adjustment of tax liability of brother of assessee not justified--Assessee entitled to interest for amount seized-- G. L. Jain v . CIT (Delhi) . . . 339

S. 143(1) --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

S. 147 --Reassessment--Limitation--Requirements only that reasons be recorded and notice be issued before expiry of time limit--Delay in supplying reasons recorded by Assessing Officer to assessee would not invalidate reassessment proceedings-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

----Reassessment--Notice--Validity--Original assessment granting special deduction under section 80-IA(4) after detailed enquiry--Reassessment proceedings to withdraw special deduction on ground that assessee not entitled to special deduction--Mere change of opinion--Notice not valid-- Parixit Industries P. Ltd . v . Asst. CIT (OSD)
(Guj) . . . 349

----Reassessment--Notice after four years--Conditions precedent--Information regarding transport subsidy available in audited accounts and statements furnished by assessee to Assessing Officer with assessee’s return--Reassessment adding transport subsidy as taxable income of assessee--Not valid-- CIT v. Sonitpur Solvex Ltd.
(Gauhati) . . . 305

----Reassessment--Notice after four years--Failure by assessee to disclose material facts--Documents attached to return only statutory auditor’s report and final accounts--Nothing disclosing specifically receipt of share capital of Rs. 4,50,000 from Q--Report of investigation wing on basis of which assessment reopened containing specific information that assessee received as accommodation entry Rs. 4,50,000 from Q with bank account particulars and instrument number--Reopening of assessment proper-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

S. 148 --Reassessment--Limitation--Requirements only that reasons be recorded and notice be issued before expiry of time limit--Delay in supplying reasons recorded by Assessing Officer to assessee would not invalidate reassessment proceedings-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

----Reassessment--Notice--Validity--Original assessment granting special deduction under section 80-IA(4) after detailed enquiry--Reassessment proceedings to withdraw special deduction on ground that assessee not entitled to special deduction--Mere change of opinion--Notice not valid-- Parixit Industries P. Ltd . v . Asst. CIT (OSD)
(Guj) . . . 349

----Reassessment--Notice after four years--Conditions precedent--Information regarding transport subsidy available in audited accounts and statements furnished by assessee to Assessing Officer with assessee’s return--Reassessment adding transport subsidy as taxable income of assessee--Not valid-- CIT v. Sonitpur Solvex Ltd.
(Gauhati) . . . 305

----Reassessment--Notice after four years--Failure by assessee to disclose material facts--Documents attached to return only statutory auditor’s report and final accounts--Nothing disclosing specifically receipt of share capital of Rs. 4,50,000 from Q--Report of investigation wing on basis of which assessment reopened containing specific information that assessee received as accommodation entry Rs. 4,50,000 from Q with bank account particulars and instrument number--Reopening of assessment proper-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

S. 149 --Reassessment--Limitation--Requirements only that reasons be recorded and notice be issued before expiry of time limit--Delay in supplying reasons recorded by Assessing Officer to assessee would not invalidate reassessment proceedings-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

S. 154 --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

----Revision--Commissioner--Powers--Rectification of mistakes--Order rejecting application in absence of revised return--Natural justice--Non-speaking order rejecting revision on ground of availability of alternative remedy of appeal not valid--Commissioner to decide petition on merits-- Universal Packaging v. CIT (Bom) . . . 398

S. 195 --Deduction of tax at source--Non-resident--Effect of section 9(1)(vii)(b)--Meaning of source of income--Manufacture of products in India--Payment to US company for certification facilitating export--Source of income within India--Section 9(1)(vii) applicable--Question of liability under DTAA between USA and India not considered--Matter remanded-- CIT v . Havells India Ltd. (Delhi) . . . 376

S. 201 --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

S. 203 --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

S. 244A --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

S. 245 --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

S. 263 --Revision--Commissioner--Powers--Rectification of mistakes--Order rejecting application in absence of revised return--Natural justice--Non-speaking order rejecting revision on ground of availability of alternative remedy of appeal not valid--Commissioner to decide petition on merits-- Universal Packaging v. CIT
(Bom) . . . 398

S. 269SS --Penalty--Deposit in cash exceeding prescribed limit--Limitation--Six months from date of initiation of action for levy of penalty--Period to be reckoned from date of issue of first show cause for penalty and not from issue of first show cause by Joint Commissioner-- CIT v . Jitendra Singh Rathore (Raj) . . . 327

S. 271(1)(c) --Penalty--Concealment of income--Transactions disclosed in return--Claim of expenditure to be revenue--Disallowance of claim--Assessee not liable for penalty-- CIT v . Amtek Auto Ltd . (P&H) . . . 394

S. 271D --Penalty--Deposit in cash exceeding prescribed limit--Limitation--Six months from date of initiation of action for levy of penalty--Period to be reckoned from date of issue of first show cause for penalty and not from issue of first show cause by Joint Commissioner-- CIT v . Jitendra Singh Rathore (Raj) . . . 327

S. 275(1)(c) --Penalty--Deposit in cash exceeding prescribed limit--Limitation--Six months from date of initiation of action for levy of penalty--Period to be reckoned from date of issue of first show cause for penalty and not from issue of first show cause by Joint Commissioner-- CIT v . Jitendra Singh Rathore (Raj) . . . 327

S. 281B --Recovery of tax--Provisional attachment--Assessment thereafter completed--Revenue not justified in attaching entire amount standing to the credit of assessee over and above demand raised against assessee-- Nirmal Singh v . Union of India
(P&H) . . . 396

--

http://finance.groups.yahoo.com/group/aaykarbhavan/

http://groups.google.com/group/aaykarbhavan

http://finance.groups.yahoo.com/group/It_law_reported/

http://groups-beta.google.com/group/fun-finder

http://finance.groups.yahoo.com/group/le-vech/

http://tech.groups.yahoo.com/group/groups_master/

--

Receive free SMS of finance updates and alert at mobile Cost free

-----

aaykarbhavan:News about the aykarbhavan

http://labs.google.co.in/smschannels/subscribe/aaykarbhavan

******

Or Join it by sending SMS

go to write messge in your mobile and type

"on aaykarbhavan"

and sen it to 9870807070

ITR (TRIB) Volume 23 : Part 2 (Issue dated : 22-4-2013) SUBJECT INDEX

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 23 : Part 2 (Issue dated : 22-4-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Advance tax --Interest--Assessee not liable to pay interest--Income-tax Act, 1961, s. 234B-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

Appeal to Appellate Tribunal --Power to admit additional grounds--Legal grounds not requiring investigation into facts--To be admitted--Income-tax Act, 1961, s. 254-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

----Rectification of mistake--Exemption--Export-
oriented undertaking--Tribunal inadvertently miscalculating number of assessment years for which exemption available--Mistake to be rectified--Change of year goes to root of order--Earlier order recalled--Income-tax Act, 1961-- Assistant CIT v. Qmax Test Equipments P. Ltd. (Chennai) . . . 187

Appeal to Commissioner (Appeals) --Power to enhance income--Income from different products manufactured under same licence agreement--Commissioner (Appeals) entitled to enhance income--Income-tax Act, 1961, s. 251-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

Capital gains --Agreement for development of property cancelled and agreement for sale and irrevocable power of attorney executed within same party--Device to reduce tax--Advance received under first agreement and forfeited and sums received as damages together constitute part of consideration for sale--Taxable as capital gains--Income-tax Act, 1961-- Hyderabad Bottling Co. Ltd. v. Deputy CIT (Hyderabad) . . . 175

----Business income--Purchase of land for agricultural purposes--No evidence that borrowed capital used for purchase--Land held as an asset--Surplus realised on asset to be taxed as capital gains--Not business income--Income-tax Act, 1961-- Additional CIT v. Delhi Apartment P. Ltd. (Delhi) . . . 217

----Transfer of asset--Date of transfer--No agreement signed or possession delivered in relevant year--Gains cannot be taxed in that year--Income-tax Act, 1961, ss. 2(47), 45-- Additional CIT v. Delhi Apartment P. Ltd. (Delhi) . . . 217

Non-resident --Burden of proof--Income deemed to accrue or arise in India--Conditions precedent--Business carried on in India--Sale to party in India without operations carried out in India not business in India--Licence granted by assessee of patented CDMA technology to non-resident original equipment manufacturers to make and sell CDMA handsets and wireless equipment in consideration for royalty--Royalty determined with reference to net selling price of product to unrelated wireless carriers worldwide--Sale of products manufactured using patented technology to wireless carriers located in India for sale to end users in India--Licence not specific to any particular country--Licence not used in India--Not established that patents licensed by assessee used for installation activities in India--Patents having nothing to do with functionality of handsets--Original equipment manufacturers themselves not brought to tax--Title to equipment passing in high seas--Mere passing of title does not result in income being attributable in India--Software not provided as part of licensing of assessee’s patents--Source of royalty was place where patent exploited which was outside India--Indian telecom operators not source of income for original equipment manufacturers--Not established that original equipment manufacturers used assessee’s patents for carrying on business in India or making or earning income from source in India--Royalty paid by original equipment manufacturers to assessee not taxable--Income-tax Act, 1961, s. 9(1)(vi)(c)--Double Taxation Avoidance Agreement between India and the United States of America, art. 12(7)(b)-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

----Fees for technical services--Payments to non-resident divers under contract for provision of underwater services in Saudi Arabia--Technical fee paid to carry out business outside India for earning income from a source outside India--Assessee not liable for tax deducted at source--Income-tax Act, 1961, s. 9(1)(vii)-- Aqua Omega Services P. Ltd. v. Assistant CIT (Chennai) . . . 191

Penalty --Failure to file return of tax deducted at source within specified time--Penalty levied unilaterally without finding whether banks need to file statements--Statements produced by assessee uploaded by franchisee in single day for all four quarters--Particulars uploaded by franchisee without permanent account numbers of deductees--Levy of penalty not justified--Income-tax Act, 1961, s. 272A(2)(k)-- Branch Manager (TDS), UCO Bank v. Additional CIT (Cuttack) . . . 209

Reassessment --Reason to believe income escaped assessment--Sufficient if one ground out of many tenable--Facts contradicting basis of belief subsequently surfacing later in course of assessment not to vitiate proceedings--No stipulation that Assessing Officer to furnish reasons for reopening with notice--Newspaper reports can constitute information or material--Income-tax Act, 1961, ss. 147, 148-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

----Reason to believe that income escaped assessment--Tax deducted at source--No presumption that there was no escapement of income--Income-tax Act, 1961, s. 147-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

----Sanction of Commissioner--Findings of Additional Director typed--Does not mean sanction accorded without application of mind--Joint Director authorised to exercise power of Additional Commissioner--Sanction for issue of notice was by an appropriate authority--Income-tax Act, 1961, ss. 2(28C), 151-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

Return of income --Failure to file--Interest--Levy of interest under section 234A proper--Income-tax Act, 1961, s. 234A-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

Revision --Commissioner--Erroneous and prejudicial to Revenue--Order passed without application of mind--Liable to be revised--Industrial undertaking--Special deduction--Assessing Officer accepting nil return of assessee and allowing claim to deduction under section 80-IA without enquiry whether assessee fulfilled conditions for eligibility therefor--Revision proper--Income-tax Act, 1961, ss. 80-IA, 263-- Vodafone Essar Ltd. v. CIT (Chandigarh) . . . 147

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and the United States of America :

Art. 12(7)(b) --Non-resident--Burden of proof--Income deemed to accrue or arise in India--Conditions precedent--Business carried on in India--Sale to party in India without operations carried out in India not business in India--Licence granted by assessee of patented CDMA technology to non-resident original equipment manufacturers to make and sell CDMA handsets and wireless equipment in consideration for royalty--Royalty determined with reference to net selling price of product to unrelated wireless carriers worldwide--Sale of products manufactured using patented technology to wireless carriers located in India for sale to end users in India--Licence not specific to any particular country--Licence not used in India--Not established that patents licensed by assessee used for installation activities in India--Patents having nothing to do with functionality of handsets--Original equipment manufacturers themselves not brought to tax--Title to equipment passing in high seas--Mere passing of title does not result in income being attributable in India--Software not provided as part of licensing of assessee’s patents--Source of royalty was place where patent exploited which was outside India--Indian telecom operators not source of income for original equipment manufacturers--Not established that original equipment manufacturers used assessee’s patents for carrying on business in India or making or earning income from source in India--Royalty paid by original equipment manufacturers to assessee not taxable-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

Income-tax Act, 1961 :

S. 2(28C) --Reassessment--Sanction of Commissioner--Findings of Additional Director typed--Does not mean sanction accorded without application of mind--Joint Director authorised to exercise power of Additional Commissioner--Sanction for issue of notice was by an appropriate authority-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

S. 2(47) --Capital gains--Transfer of asset--Date of transfer--No agreement signed or possession delivered in relevant year--Gains cannot be taxed in that year-- Additional CIT v. Delhi Apartment P. Ltd. (Delhi) . . . 217

S. 9(1)(vi)(c) --Non-resident--Burden of proof--Income deemed to accrue or arise in India--Conditions precedent--Business carried on in India--Sale to party in India without operations carried out in India not business in India--Licence granted by assessee of patented CDMA technology to non-resident original equipment manufacturers to make and sell CDMA handsets and wireless equipment in consideration for royalty--Royalty determined with reference to net selling price of product to unrelated wireless carriers worldwide--Sale of products manufactured using patented technology to wireless carriers located in India for sale to end users in India--Licence not specific to any particular country--Licence not used in India--Not established that patents licensed by assessee used for installation activities in India--Patents having nothing to do with functionality of handsets--Original equipment manufacturers themselves not brought to tax--Title to equipment passing in high seas--Mere passing of title does not result in income being attributable in India--Software not provided as part of licensing of assessee’s patents--Source of royalty was place where patent exploited which was outside India--Indian telecom operators not source of income for original equipment manufacturers--Not established that original equipment manufacturers used assessee’s patents for carrying on business in India or making or earning income from source in India--Royalty paid by original equipment manufacturers to assessee not taxable-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

S. 9(1)(vii) --Non-resident--Fees for technical services--Payments to non-resident divers under contract for provision of underwater services in Saudi Arabia--Technical fee paid to carry out business outside India for earning income from a source outside India--Assessee not liable for tax deducted at source-- Aqua Omega Services P. Ltd. v. Assistant CIT (Chennai) . . . 191

S. 45 --Capital gains--Transfer of asset--Date of transfer--No agreement signed or possession delivered in relevant year--Gains cannot be taxed in that year-- Additional CIT v. Delhi Apartment P. Ltd. (Delhi) . . . 217

S. 80-IA --Revision--Commissioner--Erroneous and prejudicial to Revenue--Order passed without application of mind--Liable to be revised--Industrial undertaking--Special deduction--Assessing Officer accepting nil return of assessee and allowing claim to deduction under section 80-IA without enquiry whether assessee fulfilled conditions for eligibility therefor--Revision proper-- Vodafone Essar Ltd. v. CIT (Chandigarh) . . . 147

S. 147 --Reassessment--Reason to believe income escaped assessment--Sufficient if one ground out of many tenable--Facts contradicting basis of belief subsequently surfacing later in course of assessment not to vitiate proceedings--No stipulation that Assessing Officer to furnish reasons for reopening with notice--Newspaper reports can constitute information or material-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

----Reassessment--Reason to believe that income escaped assessment--Tax deducted at source--No presumption that there was no escapement of income-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

S. 148 --Reassessment--Reason to believe income escaped assessment--Sufficient if one ground out of many tenable--Facts contradicting basis of belief subsequently surfacing later in course of assessment not to vitiate proceedings--No stipulation that Assessing Officer to furnish reasons for reopening with notice--Newspaper reports can constitute information or material-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

S. 151 --Reassessment--Sanction of Commissioner--Findings of Additional Director typed--Does not mean sanction accorded without application of mind--Joint Director authorised to exercise power of Additional Commissioner--Sanction for issue of notice was by an appropriate authority-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

S. 234A --Return of income--Failure to file--Interest--Levy of interest under section 234A proper-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

S. 234B --Advance tax--Interest--Assessee not liable to pay interest-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

S. 251 --Appeal to Commissioner (Appeals)--Power to enhance income--Income from different products manufactured under same licence agreement--Commissioner (Appeals) entitled to enhance income-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

S. 254 --Appeal to Appellate Tribunal--Power to admit additional grounds--Legal grounds not requiring investigation into facts--To be admitted-- Qualcomm Incorporated v. Additional Director of Income-tax (Delhi) . . . 239

S. 263 --Revision--Commissioner--Erroneous and prejudicial to Revenue--Order passed without application of mind--Liable to be revised--Industrial undertaking--Special deduction--Assessing Officer accepting nil return of assessee and allowing claim to deduction under section 80-IA without enquiry whether assessee fulfilled conditions for eligibility therefor--Revision proper-- Vodafone Essar Ltd. v. CIT (Chandigarh) . . . 147

S. 272A(2)(k) --Penalty--Failure to file return of tax deducted at source within specified time--Penalty levied unilaterally without finding whether banks need to file statements--Statements produced by assessee uploaded by franchisee in single day for all four quarters--Particulars uploaded by franchisee without permanent account numbers of deductees--Levy of penalty not justified-- Branch Manager (TDS), UCO Bank v. Additional CIT (Cuttack) . . . 209

SURRENDER OF INCOME WITHOUT EXPLANATION IS NOT A VOLUNTARY DISCLOSURE

SURRENDER OF INCOME WITHOUT EXPLANATION IS NOT A VOLUNTARY DISCLOSURE

In `Commissioner of Income Tax V. Mak Data Limited' – 2013 (1) TMI 574 - DELHI HIGH COURT there was a survey under Section 133A on 16.12.2003, in the course of which some documents pertaining to the assessee were found and impounded. The said documents consisted of blank transfer deeds for shares duly signed, affidavits, share application forms, copies of bank accounts, income tax returns and assessment orders of certain other companies. The assessee was called for to explain the contents of the documents and the genuineness of the transactions represented by them. In response to the notice it was replied that the company had received share application money from different entities aggregating to a sum of Rs.239 lakhs during the years 2003-03 to 2004-05.

The company with a view to avoid litigation and buy peace and to channelize the energy and resources towards the productive work and to make amicable settlement with the Income Tax Department offers to surrender a sum of Rs.56.49 lakhs as income from other sources. Shri V.K. Aggarwal, promoter director of the company, had offered a sum of Rs.182.51 lakhs for taxation as `income from other sources' in the hands of the partnership firm, M/s Marketing Services. He further stated that the assessee company has utilized this amount of Rs.182.51 lakhs for inducting funds into the books of the assessee company as share application money. The additional fund flow to the extent of Rs.56.49 lakhs which remain unexplained is now being offered for taxation by the company as the income from other sources.

The assessee filed an application before the Additional Commissioner of Income Tax under Section 144A soliciting directions for expediting the assessment proceedings and therein it indicated its willingness to be assessed on an amount of Rs.56.49 lakhs as its income under the head `income from other sources'. Before the Additional Commissioner the assessee scaled down the offer from Rs.56.49 lakhs to Rs.40.74 lakhs on the ground that the peak investment should be taken as Rs.219.5 lakhs instead of Rs.239 lakhs as calculated earlier.

The Assessing Officer, on the basis of the directions of the Additional Commissioner called upon the assessee to furnish the relevant documents and information regarding the fresh offer of Rs.40.74 lakhs. After verification this amount was added as `income from other sources'. There was no appeal against this order by the assessee and therefore the said order became final. Subsequently the Assessing Office initiated penalty proceedings for furnishing inaccurate information of the income under Section 271(1) (c). The assessee replied that the amount was offered as income only to buy peace and avoid protracted litigation and with the condition that no penalty or prosecution proceedings would be launched. The offer was made before any investigation was carried out into the matter and therefore, was voluntary. The Assessing Officer rejected the contention of the assessee and imposed the minimum penalty of Rs. 14,16,600/- for furnishing inaccurate particulars of the income to the tune of Rs. 40,74,000/- The reasons for rejection of the reply of the assessee are as below:

In the return filed by the assessee the assessee has not offered the amount of Rs.40.74 lakhs for taxation voluntarily;
The assessee has surrendered Rs.40.74 lakhs during course of assessment proceeding when the impounded material to the assessee which was impounded during course of survey at the business premise of marketing services;
The assessee has furnished inaccurate particulars of its income in the return of income filed on 27.10.2004 for the year under consideration;
The satisfaction was recorded at the time of completing assessment proceedings under Section 143(3) of the Act;
The assessee has itself surrendered for tax, the addition sum of Rs.40.74 lakhs which it was expected to explain the source of share application money. Moreover, admitted facts need not to be proved by the Assessing Officer, as in this case, the assessee itself admitted the concealing of income to the extent of Rs.40.74 lakhs by offering the amount for tax.
An appeal was preferred to the Commissioner of Income Tax (Appeals) who rejected the appeal and confirmed the penalty. The assessee filed further appeal before the Tribunal. The Tribunal cancelled the penalty imposed on the assessee recording the following findings:

It was only after the directions of the Additional Commissioner of Income Tax based under Section 144A that the assessee's offer was accepted and the assessment was finalized;
There was no material against the assessee to show any concealment and this fact has been admitted by the Assessing Officer himself; there is not even any indicated in the penalty order as to the particular credit in respect of which the penalty was being imposed;
The fact that the assessee surrendered the income only when it was confronted with the documents found in the survey does not adversely affect its case;
The assessee did not admit that it had concealed the income to the extent of Rs.40.74 lakhs; it has made it clear in the letter dated 22.11.2006 that the surrender was made without any admission of concealment or intention to conceal;
The offer was made in a spirit of settlement of the dispute with the Revenue and no investigation was carried out by the Assessing Officer to prove the concealment.
The Revenue, being aggrieved by the order of the Tribunal filed the present appeal before the High Court. The Revenue contended that the Tribunal failed to appreciate the provisions of Explanation 1 to Section 271(1) (c) of the Act, which reads as below:

Explanation 1.- Where in respect of any facts material to the computation of the total income of any person under this Act.-

(A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false; or

(B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total number of such person as a result thereof shall, for the purpose of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.

The High Court held that the Revenue is right in contending that there was absolutely no explanation from the assessee in respect of the amount of Rs.40.74 lakhs; when the Assessing Officer called upon the assessee to produce the evidence as to the nature and source of the amount received as share capital, the creditworthiness of the applicants and the genuineness of the transactions the assessee simply folded up and surrendered a sum of Rs.56.49 lakhs in its hands initially, which was later scaled down to Rs.40.74 lakhs. The assessee merely stated that with a view to avoid litigation and buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the Income Tax Department, it surrendered the income under the head `income from other sources'. In the absence of any explanation in respect of the surrendered income, the first part of clause (A) of Explanation 1 is attracted. It cannot be denied that the nature and source of the amount surrendered are facts material to computation of the total income of the Revenue.

The High Court further held that the Revenue is entitled to know the same and if the nature of the source of the amount is not explained, it is entitled to draw the inference that the amount represents the assessee's table income. Though this principle was originally confined to the assessment proceedings, the Explanation has extended it to penalty proceedings also, presumably on the assumption that the furnishing of an explanation regarding the nature and source would have compromised the assessee's position. It is the assessee who has received the monies and is in the knowledge of all the facts relevant and material in relation to the receipt. Therefore it should be in a position to offer an explanation and disclose the material facts regarding the same. The High Court set aside the order of the
Tribunal and confirmed the findings of lower authorities below.

INCOME TAX REPORTS (ITR)

Volume 352 Part 3 (Issue dated 22-4-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Capital gains --Business income--Trading or investment--Long-term capital gains--Assessee treating land as fixed asset for a long time and using it for agricultural purposes--No evidence that assessee purchased land by funds borrowed--Sale proceeds resulting long-term capital gains and not business income--Income-tax Act, 1961-- CIT v. Delhi Apartments Pvt. Ltd. (Delhi) . . . 322

Capital or revenue expenditure --Company--Expenditure on debenture--Debenture to be converted subsequently to shares--Expenditure deductible--Income-tax Act, 1961, s. 37-- CIT v . Havells India Ltd . (Delhi) . . . 376

----Expenditure on installation of new unit--Finding that new unit constituted extension of existing business and there was common management--Expenditure deductible--Income-tax Act, 1961, s. 37-- CIT v. Havells India Ltd .

(Delhi) . . . 376

----Expenditure relating to voluntary retirement scheme in respect of two units of assessee--Closure of two units not resulting in closure of business of assessee--Expenditure incurred for purpose of restructuring to achieve modernisation--Allowable as revenue expenditure--Income-tax Act, 1961, s. 37(1)-- CIT v. Foseco India Ltd .

(Bom) . . . 320

Deduction of tax at source --Non-resident--Effect of section 9(1)(vii)(b)--Meaning of source of income--Manufacture of products in India--Payment to US company for certification facilitating export--Source of income within India--Section 9(1)(vii) applicable--Question of liability under DTAA between USA and India not considered--Matter remanded--Income-tax Act, 1961, ss. 9(1)(vii), 40(a)(ia), 195-- CIT v . Havells India Ltd. (Delhi) . . . 376

Exemption --Educational institution--Denial of exemption under section 10(23C)(vi)--Registration under section 12A cannot be cancelled on basis of order denying exemption--Exemption can be claimed without applying for registration--Both are independent proceedings--Income-tax Act, 1961, ss. 10(23C)(vi), 12A-- CIT v . Society of Advanced Management Studies (All) . . . 269

Export --Special deduction--Different units of assessee engaged in manufacturing of different goods--Does not make separate units of assessee separate and different assessable units--Loss of one division to be adjusted against profit of other division for purposes of computation of deduction under section 80HHC--Income-tax Act, 1961, s. 80HHC-- Madhav Marbles and Granites Ltd. v. Asst. CIT (Raj) . . . 331

Income --Accrual of income--No transfer of possession during previous year relevant to assessment year 2006-07 but only receipt of advance--Execution of sale deed in following year--Amount received as advance not taxable in assessment year 2006-07--Income-tax Act, 1961-- CIT v . Delhi Apartments Pvt. Ltd . (Delhi) . . . 322

Penalty --Concealment of income--Transactions disclosed in return--Claim of expenditure to be revenue--Disallowance of claim--Assessee not liable for penalty--Income-tax Act, 1961, s. 271(1)(c)-- CIT v . Amtek Auto Ltd . (P&H) . . . 394

----Deposit in cash exceeding prescribed limit--Limitation--Six months from date of initiation of action for levy of penalty--Period to be reckoned from date of issue of first show cause for penalty and not from issue of first show cause by Joint Commissioner--Income-tax Act, 1961, ss. 269SS, 271D, 275(1)(c)-- CIT v . Jitendra Singh Rathore

(Raj) . . . 327

Reassessment --Limitation--Requirements only that reasons be recorded and notice be issued before expiry of time limit--Delay in supplying reasons recorded by Assessing Officer to assessee would not invalidate reassessment proceedings--Income-tax Act, 1961, ss. 147, 148, 149-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

----Notice--Validity--Original assessment granting special deduction under section 80-IA(4) after detailed enquiry--Reassessment proceedings to withdraw special deduction on ground that assessee not entitled to special deduction--Mere change of opinion--Notice not valid--Income-tax Act, 1961, ss. 80-IA, 147, 148-- Parixit Industries P. Ltd . v . Asst. CIT (OSD) (Guj) . . . 349

----Notice after four years--Conditions precedent--Information regarding transport subsidy available in audited accounts and statements furnished by assessee to Assessing Officer with assessee’s return--Reassessment adding transport subsidy as taxable income of assessee--Not valid--Income-tax Act, 1961, ss. 147, 148-- CIT v. Sonitpur Solvex Ltd. (Gauhati) . . . 305

----Notice after four years--Failure by assessee to disclose material facts--Documents attached to return only statutory auditor’s report and final accounts--Nothing disclosing specifically receipt of share capital of Rs. 4,50,000 from Q--Report of investigation wing on basis of which assessment reopened containing specific information that assessee received as accommodation entry Rs. 4,50,000 from Q with bank account particulars and instrument number--Reopening of assessment proper--Income-tax Act, 1961, ss. 147, 148-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

Recovery of tax --Provisional attachment--Assessment thereafter completed--Revenue not justified in attaching entire amount standing to the credit of assessee over and above demand raised against assessee--Income-tax Act, 1961, s. 281B-- Nirmal Singh v . Union of India (P&H) . . . 396

Return of income --Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes--Income-tax Act, 1961, ss. 143(1), 154, 201, 203, 244A, 245-- Court on its own Motion v . CIT

(Delhi) . . . 273

Revision --Commissioner--Powers--

Rectification of mistakes--Order rejecting application in absence of revised return--Natural justice--Non-speaking order rejecting revision on ground of availability of alternative remedy of appeal not valid--Commissioner to decide petition on merits--Income-tax Act, 1961, ss. 154, 263-- Universal Packaging v. CIT (Bom) . . . 398

Search and seizure --Refund of excess amounts seized--Interest on refund--Period for which interest payable--Refund as a result of appellate order--Interest payable from date of original assessment order--Adjustment of tax liability of brother of assessee not justified--Assessee entitled to interest for amount seized--Income-tax Act, 1961, s. 132B(3)-- G. L. Jain v . CIT (Delhi) . . . 339

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 9(1)(vii) --Deduction of tax at source--Non-resident--Effect of section 9(1)(vii)(b)--Meaning of source of income--Manufacture of products in India--Payment to US company for certification facilitating export--Source of income within India--Section 9(1)(vii) applicable--Question of liability under DTAA between USA and India not considered--Matter remanded-- CIT v . Havells India Ltd. (Delhi) . . . 376

S. 10(23C)(vi) --Exemption--Educational institution--Denial of exemption under section 10(23C)(vi)--Registration under section 12A cannot be cancelled on basis of order denying exemption--Exemption can be claimed without applying for registration--Both are independent proceedings-- CIT v . Society of Advanced Management Studies (All) . . . 269

S. 12A --Exemption--Educational institution--Denial of exemption under section 10(23C)(vi)--Registration under section 12A cannot be cancelled on basis of order denying exemption--Exemption can be claimed without applying for registration--Both are independent proceedings-- CIT v . Society of Advanced Management Studies
(All) . . . 269

S. 37 --Capital or revenue expenditure--Company--Expenditure on debenture--Debenture to be converted subsequently to shares--Expenditure deductible-- CIT v . Havells India Ltd . (Delhi) . . . 376

----Capital or revenue expenditure--Expenditure on installation of new unit--Finding that new unit constituted extension of existing business and there was common management--Expenditure deductible-- CIT v. Havells India Ltd . (Delhi) . . . 376

S. 37(1) --Capital or revenue expenditure--Expenditure relating to voluntary retirement scheme in respect of two units of assessee--Closure of two units not resulting in closure of business of assessee--Expenditure incurred for purpose of restructuring to achieve modernisation--Allowable as revenue expenditure-- CIT v. Foseco India Ltd .
(Bom) . . . 320

S. 40(a)(ia) --Deduction of tax at source--Non-resident--Effect of section 9(1)(vii)(b)--Meaning of source of income--Manufacture of products in India--Payment to US company for certification facilitating export--Source of income within India--Section 9(1)(vii) applicable--Question of liability under DTAA between USA and India not considered--Matter remanded-- CIT v . Havells India Ltd. (Delhi) . . . 376

S. 80HHC --Export--Special deduction--Different units of assessee engaged in manufacturing of different goods--Does not make separate units of assessee separate and different assessable units--Loss of one division to be adjusted against profit of other division for purposes of computation of deduction under section 80HHC-- Madhav Marbles and Granites Ltd. v. Asst. CIT (Raj) . . . 331

S. 80-IA --Reassessment--Notice--Validity--Original assessment granting special deduction under section 80-IA(4) after detailed enquiry--Reassessment proceedings to withdraw special deduction on ground that assessee not entitled to special deduction--Mere change of opinion--Notice not valid-- Parixit Industries P. Ltd . v . Asst. CIT (OSD) (Guj) . . . 349

S. 132B(3) --Search and seizure--Refund of excess amounts seized--Interest on refund--Period for which interest payable--Refund as a result of appellate order--Interest payable from date of original assessment order--Adjustment of tax liability of brother of assessee not justified--Assessee entitled to interest for amount seized-- G. L. Jain v . CIT (Delhi) . . . 339

S. 143(1) --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

S. 147 --Reassessment--Limitation--Requirements only that reasons be recorded and notice be issued before expiry of time limit--Delay in supplying reasons recorded by Assessing Officer to assessee would not invalidate reassessment proceedings-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

----Reassessment--Notice--Validity--Original assessment granting special deduction under section 80-IA(4) after detailed enquiry--Reassessment proceedings to withdraw special deduction on ground that assessee not entitled to special deduction--Mere change of opinion--Notice not valid-- Parixit Industries P. Ltd . v . Asst. CIT (OSD)
(Guj) . . . 349

----Reassessment--Notice after four years--Conditions precedent--Information regarding transport subsidy available in audited accounts and statements furnished by assessee to Assessing Officer with assessee’s return--Reassessment adding transport subsidy as taxable income of assessee--Not valid-- CIT v. Sonitpur Solvex Ltd.
(Gauhati) . . . 305

----Reassessment--Notice after four years--Failure by assessee to disclose material facts--Documents attached to return only statutory auditor’s report and final accounts--Nothing disclosing specifically receipt of share capital of Rs. 4,50,000 from Q--Report of investigation wing on basis of which assessment reopened containing specific information that assessee received as accommodation entry Rs. 4,50,000 from Q with bank account particulars and instrument number--Reopening of assessment proper-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

S. 148 --Reassessment--Limitation--Requirements only that reasons be recorded and notice be issued before expiry of time limit--Delay in supplying reasons recorded by Assessing Officer to assessee would not invalidate reassessment proceedings-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

----Reassessment--Notice--Validity--Original assessment granting special deduction under section 80-IA(4) after detailed enquiry--Reassessment proceedings to withdraw special deduction on ground that assessee not entitled to special deduction--Mere change of opinion--Notice not valid-- Parixit Industries P. Ltd . v . Asst. CIT (OSD)
(Guj) . . . 349

----Reassessment--Notice after four years--Conditions precedent--Information regarding transport subsidy available in audited accounts and statements furnished by assessee to Assessing Officer with assessee’s return--Reassessment adding transport subsidy as taxable income of assessee--Not valid-- CIT v. Sonitpur Solvex Ltd.
(Gauhati) . . . 305

----Reassessment--Notice after four years--Failure by assessee to disclose material facts--Documents attached to return only statutory auditor’s report and final accounts--Nothing disclosing specifically receipt of share capital of Rs. 4,50,000 from Q--Report of investigation wing on basis of which assessment reopened containing specific information that assessee received as accommodation entry Rs. 4,50,000 from Q with bank account particulars and instrument number--Reopening of assessment proper-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

S. 149 --Reassessment--Limitation--Requirements only that reasons be recorded and notice be issued before expiry of time limit--Delay in supplying reasons recorded by Assessing Officer to assessee would not invalidate reassessment proceedings-- A. G. Holdings Pvt. Ltd . v . ITO (Delhi) . . . 364

S. 154 --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

----Revision--Commissioner--Powers--Rectification of mistakes--Order rejecting application in absence of revised return--Natural justice--Non-speaking order rejecting revision on ground of availability of alternative remedy of appeal not valid--Commissioner to decide petition on merits-- Universal Packaging v. CIT (Bom) . . . 398

S. 195 --Deduction of tax at source--Non-resident--Effect of section 9(1)(vii)(b)--Meaning of source of income--Manufacture of products in India--Payment to US company for certification facilitating export--Source of income within India--Section 9(1)(vii) applicable--Question of liability under DTAA between USA and India not considered--Matter remanded-- CIT v . Havells India Ltd. (Delhi) . . . 376

S. 201 --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

S. 203 --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

S. 244A --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

S. 245 --Return of income--Intimation--Deduction of tax at source--Credit for--Refunds--Adjustment of refund--Central processing centre--Hardships faced by assessees owing to faulty processing of returns and uploading of details of tax deducted at source--High Court--Directions given to Department and Central Board of Direct Taxes-- Court on its own Motion v . CIT (Delhi) . . . 273

S. 263 --Revision--Commissioner--Powers--Rectification of mistakes--Order rejecting application in absence of revised return--Natural justice--Non-speaking order rejecting revision on ground of availability of alternative remedy of appeal not valid--Commissioner to decide petition on merits-- Universal Packaging v. CIT
(Bom) . . . 398

S. 269SS --Penalty--Deposit in cash exceeding prescribed limit--Limitation--Six months from date of initiation of action for levy of penalty--Period to be reckoned from date of issue of first show cause for penalty and not from issue of first show cause by Joint Commissioner-- CIT v . Jitendra Singh Rathore (Raj) . . . 327

S. 271(1)(c) --Penalty--Concealment of income--Transactions disclosed in return--Claim of expenditure to be revenue--Disallowance of claim--Assessee not liable for penalty-- CIT v . Amtek Auto Ltd . (P&H) . . . 394

S. 271D --Penalty--Deposit in cash exceeding prescribed limit--Limitation--Six months from date of initiation of action for levy of penalty--Period to be reckoned from date of issue of first show cause for penalty and not from issue of first show cause by Joint Commissioner-- CIT v . Jitendra Singh Rathore (Raj) . . . 327

S. 275(1)(c) --Penalty--Deposit in cash exceeding prescribed limit--Limitation--Six months from date of initiation of action for levy of penalty--Period to be reckoned from date of issue of first show cause for penalty and not from issue of first show cause by Joint Commissioner-- CIT v . Jitendra Singh Rathore (Raj) . . . 327

S. 281B --Recovery of tax--Provisional attachment--Assessment thereafter completed--Revenue not justified in attaching entire amount standing to the credit of assessee over and above demand raised against assessee-- Nirmal Singh v . Union of India
(P&H) . . . 396

--

http://finance.groups.yahoo.com/group/aaykarbhavan/

http://groups.google.com/group/aaykarbhavan

http://finance.groups.yahoo.com/group/It_law_reported/

http://groups-beta.google.com/group/fun-finder

http://finance.groups.yahoo.com/group/le-vech/

http://tech.groups.yahoo.com/group/groups_master/

--

Receive free SMS of finance updates and alert at mobile Cost free

-----

aaykarbhavan:News about the aykarbhavan

http://labs.google.co.in/smschannels/subscribe/aaykarbhavan

******

Or Join it by sending SMS

go to write messge in your mobile and type

"on aaykarbhavan"

and sen it to 9870807070