Some decisions of various courts, tribunals related to various sections of IT Act 1961

CASE 1

Kalluri Krishan Pushkar v. Dy. CIT (2016) 236 Taxman 27 / 135 DTR 351 (AP &T)(HC)

Section 276C(1) in The Income- Tax Act, 1995

(1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty, or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable,-

(i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months, but which may extend to seven years and with fine.

(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months, but which may extend to three years and with fine.

BRIEF FACTS & DECISIONS

Assessee filed the return of income declaring the total income of 2.10 crore on which tax and interest of ` 68.28 lakh became payable. However, out of the above tax payable, the assessee did not pay a sum of ` 58.15 lakh. Notice under section 221(1) was issued to him by the DCIT to produce the details of tax paid. Assessee filed a letter stating that he had done contracts for the State Government on which tax was payable.

However, self-assessment tax was not paid as he did not receive the amounts due from the State Government and that he was willing to pay the tax once these amounts were received from the Government. Prosecution proceedings were launched against the assessee.

DECISION

High Court rejected the assessee's plea that prosecution should be quashed as notice under section 156 was not served on the assessee. High Court held that such notice is not required to be issued for prosecution. High Court further held that existence of other modes of recovery cannot act as a bar to the initiation of prosecution proceedings.

CASE-2

Pradip Burman v. ITO (2016) 382 ITR 418/ 236 Taxman 606 / 129 DTR 404 (Delhi)(HC)

Section 276D in The Income- Tax Act, 1995

Failure to produce accounts and documents If a person wilfully fails to produce, or cause to be produced, on or before the date specified in any notice served on him under sub- section (1) of section 142- such accounts and documents as are referred to in the notice or wilfully fails to comply with a direction issued to him under sub- section (2A) of that section, he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine equal to a sum calculated at a rate which shall not be less than four rupees or more than ten rupees for every day during which the default continues, or with both.

BRIEF FACTS & DECISION

Assessee filed return of income declaring total income of Rs. 75,31,769. Subsequently, when the Income-tax department received information regarding existence of a foreign bank account, the assessee offered to pay the tax on the amount lying in his foreign bank account. Later, assessee filed appeal against the assessment order and penalty order passed by the Assessing Officer. The assessee also filed a stay application, before Additional Chief Metropolitan Magistrate, against launch of prosecution on the ground that the appeal before the appellate authority is pending. The Additional Chief Metropolitan Magistrate dismissed the stay application filed by the assesse.

DECISION

On writ petition, High Court held that pendency of appeal before the authority has no bearing on the prosecution. The Court also held that at the time of commission of alleged offence the petitioner has not reached the age of 70 years hence the instruction No. 5051 dated 07-02-2011 which stated that no prosecution can be initiated against a person who is above the age of 70 years was held to be not applicable.

CASE-3

Babita Lila v. UOI (2016) 387 ITR 305 / 288 CTR 489 / 243 Taxman 258 (SC)

Section 277 of the Income Tax Act,1961.

False statement in verification, etc. If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable,-

(i) in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months, but which may extend to seven years and with fine.

(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months, but which may extend to three years and with fine.

BRIEF FACTS & DECISIONS

1. The assessees had residences at Bhopal and Aurangabad and filed their returns of income at Bhopal.
2. Search operations under section 132 of the Act were simultaneously conducted at both places on the strength of the warrant of authorisation under section 132 of the Act, issued, signed and sealed by the Director of Income-tax (Investigation), Bhopal.
3. In the course of the interrogation of the assessees on whether they or any of them either individually or jointly did hold any locker, their answer was in the negative.
4. Their statements were recorded by the Income-tax Officers.
5. Further investigation revealed that they did hold a locker in a bank at Aurangabad.
6. The office of the Deputy Director of Income-tax (Investigation), Bhopal issued a show-cause notice to the assessees under section 277 of the Act alleging that they had made false statement under section 132(4) thereof and seeking a reply to why prosecution should not follow by virtue thereof.
7. Pursuant to this, a complaint was filed by the Deputy Director of Income-tax (Investigation), Bhopal, in the Court of the Chief Judicial Magistrate, Bhopal, asserting that by making such false statement in the course of search operations which were judicial proceedings in terms of section 136 of the Act, the assessees had committed offence under sections 109, 191, 193, 196, 200, 420, 120B and 34 of the Indian Penal Code, 1860.
8. The Chief Judicial Magistrate issued process and on petitions before the High Court by the assessees seeking quashing of the proceedings on the ground that the search operations having been undertaken by the Income-tax Officers, the complaint could not have been lodged by the Deputy Director of Income-tax (Investigation) who was not the appellate authority in terms of section 195(4) of the 1973 Code and further no part of the alleged offence having been committed within the territorial limits of the court of the Chief Judicial Magistrate, Bhopal, the latter had no jurisdiction to either entertain the complaint or take cognizance of the accusations.
9. The High Court upheld the jurisdiction of the Chief Judicial Magistrate and the competence of the Deputy Director (Investigation) to lodge the complaint.
10. On further appeal: The Apex Court Held accordingly, that the Deputy Director of Income-tax (Investigation), Bhopal, was not an authority to whom appeal would ordinarily lie from the decisions/orders of Income-tax Officers involved in search proceedings so as to empower him to lodge the complaint in view of the restrictive preconditions imposed by section 195 of the 1973 Code.
11. The complaint filed by the Deputy Director of Income-tax, (Investigation), Bhopal thus on an overall analysis of the facts of the case and the law involved was incompetent. The complaint was unsustainable in law having been filed by an authority, incompetent in terms of section 195 of the 1973 Code.
12. Court also held that it could not be said that in the singular facts and circumstances, no part of the offence alleged had been committed within the jurisdictional limits of the Chief Judicial Magistrate, Bhopal.
13. On a cumulative reading of sections 177, 178 and 179 of the 1973 Code in particular and the in-built flexibility discernible in the latter two provisions, in the attendant facts and circumstances of the case where a single and combined search operation had been undertaken simultaneously both at Bhopal and Aurangabad for the same purpose, the alleged offence could be tried by courts otherwise competent at both these places. To confine the authority within the territorial limits to the court at Aurangabad would amount to impermissible and illogical truncation of the ambit of sections 178 and 179 of the 1973 Code.

CASE-4

V. A. Haseeb and Co. (Firm) v. CCIT (2017) 152 DTR 306 (Mad.)(HC)

SECTION 279-

Prosecution to be at the instance of Chief Commissioner or Commissioner

(1) A person shall not be proceeded against for an offence under section 275A, section 276, section 276A, section 276B, section 276BB, section 276C, section 276CC, section 276D, section 277 or section 278 except with the previous sanction of the Commissioner or Commissioner (Appeals) or the appropriate authority:

Provided that the Chief Commissioner or, as the case may be, Director General may issue such instructions or directions to the aforesaid income- tax authorities as he may deem fit for institution of proceedings under this sub- section.

Explanation.- For the purposes of this section," appropriate authority" shall have the same meaning as in clause (c) of section 269UA.

(1A) A person shall not be proceeded against for an offence under section 276C or section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on him under clause (iii) of sub- section (1) of section 271 has been reduced or waived by an order under section 273A.

(2) Any offence under this Chapter may, either before or after the institution of proceedings, be compounded' by the Chief Commissioner or Director General.

(3) Where any proceeding has been taken against any person under sub- section (1), any statement made or account or other document produced by such person before any of the income- tax authorities specified in ³ clauses (a) to (g) of section 116 shall not be inadmissible as evidence for the purpose of such proceedings merely on the ground that such statement was made or such account or other document was produced in the belief that the penalty imposable would be reduced or waived,under section 273A or that the offence in respect of which such proceeding was taken would be compounded.

Explanation.- For the removal of doubts, it is hereby declared that the power of the Board to issue orders, instructions, or directions under this Act shall include and shall be deemed always to have included the power to issue instructions or directions (including instructions or directions to obtain the previous approval of the Board) to other income- tax authorities for the proper composition of offences under this section.

BRIEF FACTS & DECISION

Chief Commissioner of Income tax TDS has rejected the petitioner's application for compounding the offence committed by the petitioner under section 276B read with section 278B of the Income-tax Act, on the ground that the assessee has been convicted by the Criminal Court.

Allowing the petition, the Court held that the assessee has been convicted of an offense does not mean that the application for compounding of the offence is not maintainable. Under the guidelines, the competent authority has to examine the merits of the case and decide whether there is a case for compounding.

There are no fetters on the powers of the competent authority under the guidelines.

DECISION

Thus, this Court is of the view that the respondent can examine the matter afresh without being, in any manner, influenced merely because of the conviction passed against the petitioner by the Criminal Court.

CASE-5

Sajid Salimbhai Saiyed v. UOI (2019) 265 Taxman 191 (Guj.)(HC)

SECTION 281 OF INCOME TAX ACT,1961- Certain transfers to be void;\

(1) Where, during the pendency of any proceeding under this Act or after the completion thereof, but before the service of notice under rule 2 of the Second Schedule, any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of, any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceeding or otherwise :

Provided that such charge or transfer shall not be void if it is made—

(i) for adequate consideration and without notice of the pendency of such proceeding or, as the case may be, without notice of such tax or other sum payable by the assessee ; or

(ii) with the previous permission of the Assessing Officer.

(2) This section applies to cases where the amount of tax or other sum payable or likely to be payable exceeds five thousand rupees and the assets charged or transferred exceed ten thousand rupees in value.

Explanation.—In this section, "assets" means land, building, machinery, plant, shares, securities, and fixed deposits in banks, to the extent to which any of the assets aforesaid does not form part of the stock-in-trade of the business of the assessee.

BRIEF FACTS & DECISIONS

• Despite of notice of attachment the property was sold by the owner in favour of the petitioner.
• The Tax Recovery Officer issued on the assessee a notice dated 27-3-2019 and directed him to handover vacant and peaceful possession of the property to the department.
• The assessee filed a writ petition challenging the notice dated 27-3-2019.
• He stated that he was the bona fide purchaser of the property for value without notice. He had no idea about any such notice being issued by the department to Shri Aziz Ahmed Shaikh and he had also no idea that the property was already attached by the department. He placed reliance on the provisions of section 281.

DECISION BY HIGH COURT

• The assessee on being asked by the Court pointed out that he has not so far responded in any manner to the notice dated 27-3-2019.
• If the assessee is seeking to rely upon the proviso (i) to Section 281, he needs to point out to the authority concerned that the purchase of the attached property was for adequate consideration and without notice of the pendency of any proceedings against the defaulter Shri Aziz Ahmed Shaikh and that too the transfer was before the service of notice under rule 2 of the Second Schedule to the Income tax Act.
• The assessee shall appear before the Tax Recovery Officer at the earliest and adduce necessary evidence and also make good his case for discharging the notice dated 27-3-2019.
• The authority concerned shall hear the assessee and pass appropriate order in accordance with law.
• It is expected by the authority concerned not to take any coercive steps against the assessee till the completion of this exercise as directed by the Court.

CASE-6

Anidhi Impex Pvt. Ltd. v. ITO (2019) 73 ITR 379 (Mum.)(Trib.)

SECTION 143(2)-Where a return has been furnished under Section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:

Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.

BRIEF FACTS & DECISION

• The AO had served notice u/s 143(2) on 27 August 2013 upon a certain person who was in part time employee of the assessee till 31 March 2011. Subsequently, the AO had again issued notice u/s 143(2) on the directors beyond the time limit for the said notice.
• The Tribunal noted that the assessee had submitted affidavit from the part time employee wherein the said person had refused to accept the notice (as he was no longer associated with the assessee), and he could not send the notice to the company due to the change in address. Further, the directors also filed affidavits reconfirming the facts.
• The Tribunal after analyzing the provisions of S. 282 of the Act and the provisions of the Civil Procedure Code, 1908 considered that the notice was not served upon a person who was authorised to receive it and thus lead to invalid service/ non-service of notice and the assessment order u/s 143(3) was to be quashed.

CASE-7

Himalayan Cooperative Group Housing Society v. Balwan Singh (2015) 7 SCC 373

SECTION 143(2)-Where a return has been furnished under Section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:

Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.

BRIEF FACTS & DECISION

1. The Authorised representative contended before the Tribunal that the notice u/s.143(2) was not served on the partners of the assessee firm as is the requirement under the law.
2. He submitted that the service of notice on Shri Harish C. Pawar, Manager of the assessee did not tantamount to a valid service and hence the assessment be quashed.
3. Departmental representative placed on record a copy of order sheet of the assessment proceedings.
4. The Tribunal noticed that entry dated 13-08-2012 of the assessment proceedings notes that Shri D. P. Lunawat, Advocate attended on behalf of the assessee.
5. This order sheet entry further records that office copy of notice u/s. 143(2) was shown to Shri D. P. Lunawat, duly signed by the assessee firm and received by Shri Harish C. Pawar, Manager.
6. It goes on to state that the ld. AR was asked if he still had any objection to the service of notice, to which Shri Harish C. Pawar stated that 'he has no objection.'
7. Accordingly, the Tribunal held that if the assessee objects to the AO's jurisdiction, but his Authorized Representative later conveys no-objection, it means that the assessee has withdrawn his objection.
8. Submission that the AR had no authority to convey no-objection and cannot bind the assessee is not acceptable.
9. Once the assessee empowers his Authorised representative to appear before authorities, all of the Authorised representative concessions are binding on the assessee.
10. Accordingly Challenge to the assessment on the basis that there was valid service is held to be not valid.

CASE-8

Anil Kisanlal Marda v. ITO (2019) 177 ITD 749 / 182 DTR 153 / 201 TTJ 100 (Pune)(Trib.)

S. 143(2) : Assessment - Notice - If a notice is issued but is returned unserved by the postal authorities and thereafter no effort is made to serve another notice before the deadline, it shall be deemed to be a case of "non-service" and the assessment order will have to be quashed.

BRIEF FACTS & DECISION

Tribunal held that there is a difference between "issue" of notice and "service" of notice. Service of notice is a pre-condition for assuming jurisdiction to frame the assessment.

Under Rule 127, service at the PAN address is valid even if it is different from the address in the Return. If a notice is issued but is returned unserved by the postal authorities and thereafter no effort is made to serve another notice before the deadline, it shall be deemed to be a case of "non-service" and the assessment order will have to be quashed.

DISCLAIMER: the case laws produced above are for sharing information and knowledge with the readers on subject matter. In case of necessity do consult with tax professionals.

CASE-9

Roopa Electricals v. ITO (2019) 57 CCH 501 / 76 ITR 39 (SMC) (SN) (Bang.)(Trib.)

SECTION 143(3)

On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:

Provided that in the case of a—

(a) research association referred to in clause (21) of section 10;

(b) news agency referred to in clause (22B) of section 10;

(c) association or institution referred to in clause (23A) of section 10;

(d) institution referred to in clause (23B) of section 10;

(e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) of clause (23C) of section 10, which is required to furnish the return of income under sub-section (4C) of section 139, no order making an assessment of the total income or loss of such research association, news agency, association or institution or fund or trust or university or other educational institution or any hospital or other medical institution, shall be made by the Assessing Officer, without giving effect to the provisions of section 10, unless—

(i) the Assessing Officer has intimated the Central Government or the prescribed authority the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, as the case may be, by such research association, news agency, association or institution or fund or trust or university or other educational institution or any hospital or other medical institution, where in his view such contravention has taken place; and

(ii) the approval granted to such research association or other association or fund or trust or institution or university or other educational institution or hospital or other medical institution has been withdrawn or notification issued in respect of such news agency or fund, or trust or institution has been rescinded :

Provided further that where the Assessing Officer is satisfied that the activities of the university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35 are not being carried out in accordance with all or any of the conditions subject to which such university, college or other institution was approved, he may, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned university, college or other institution, recommend to the Central Government to withdraw the approval and that Government may by order, withdraw the approval and forward a copy of the order to the concerned university, college or other institution and the Assessing Officer:

Provided also that notwithstanding anything contained in the first and the second provisos, no effect shall be given by the Assessing Officer to the provisions of clause (23C) of section 10 in the case of a trust or institution for a previous year, if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in such previous year, whether or not the approval granted to such trust or institution or notification issued in respect of such trust or institution has been withdrawn or rescinded.

(3A) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) to impart greater efficiency, transparency, and accountability by—

(a) eliminating the interface between the Assessing Officer and the assessee during proceedings to the extent technologically feasible.

(b) optimising utilisation of the resources through economies of scale and functional specialisation.

(c) introducing a team-based assessment with dynamic jurisdiction.

(3B) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:

Provided that no direction shall be issued after the 31st day of March 2020.

(3C) Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.

BRIEF FACTS & DECISIONS

1. Assessee received income for some contract work done for Kuvempu University. The Kuvempu university in its TDS Return has recorded higher amount as compared to that recorded by the assessee in its books of accounts.
2. Thus, the AO has made addition based on difference in Form 26AS and books of accounts of the assessee which was also confirmed by CIT(A).
3. On appeal the Tribunal relying on the decision of Hon'ble Mumbai ITAT in case of TUV India Pvt. Ltd. (2019) 75 ITR 364 (Mum,)(Trib.) which has similar facts as that of assessee and has held that:

• Addition to total income cannot be made due to discrepancy in receipts as shown in 26AS;
• There is difference in accounting policy followed by assessee and clients who have deducted TDS, or the TDS have been deducted by the clients on inclusive of service tax whereas the income reflected by assessee is exclusive of service tax;
• The assessee does not have control over the data base of the Income tax Department as reflected in Form 26AS and at the best it can obtain bonafide explanations for this difference;
• The Department has all the information in its possession and control and thus, should have conducted necessary enquiries to unravel the truth but asking the assessee to do is not warranted.

Thus, no addition can be made on the difference between the income as per Form 26AS and as that reflected in books of accounts.

CASE-10

Fortune Vincom Pvt. Ltd. v. ITO (2019) 69 ITR 48 (SN) (Kol.)(Trib.)

S. 143(3) : Assessment - Assessing Officer is bound to follow the directions provided in the order u/s. 263 by the CIT.

BRIEF FACTS & DECISION

1. The assesse filed the return of income for A.Y. 2008-09 declaring the total loss of Rs. 283/-which was processed u/s 143(1).
2. Thereafter, Ld. Assessing officer reopened the assessment wherein transaction of share capital and share premium was the subject matter of verification.
3. The re-assessment was completed under u/s 143 r.w.s 147 of the Act determining the total income at Rs. 17,720/-.
4. This re-assessment was subjected to revision proceedings u/s 263 of the Act by the CIT on the ground that the AO had not properly enquired and verified the genuineness and source of application money/share capital as well as identity and creditworthiness of the shareholders who had applied for the shares of the company.
5. Accordingly, CIT set aside the order passed by the AO with certain specific guidelines regarding investigation to be carried out while assessing the assessee de-novo.
6. The. AO in consequential proceedings giving effect to the order of CIT called for the certain details from the assessee.
7. There was no response from the assesse.
8. AO observed that assesse failed in proving the genuineness of the transaction as well as the identity and creditworthiness of the shareholders.
9. Accordingly, AO made addition of Rs. 7,65,00,000/-to the total income of the assesse as unexplained cash credit u/s 68 of the Act.
10. On appeal before CIT (A), CIT (A) upheld the order of AO.
11. Aggrieved by the order of Ld. CIT (A), assessee filed an appeal before the ITAT.

12. The Tribunal observed that entire transaction of share capital and share premium was subject matter of verification in the reassessment proceedings wherein the assessee had responded to the notices u/s 133(6) of the Act.
13. The CIT in the revision order had specifically directed the AO to make inquiries directly from the shareholders and not through the assesse. Hence, non-appearance of the assessee or non-submission of details before the AO does not make any relevance.
14. The Tribunal held that the Ld. AO did not resort to make inquiries in the manner stated by the Ld. CIT u/s. 263 of the Act in-spite of the fact that all the necessary details were available before him. The Ld. CIT had directed the AO to investigate into the multiple layers of the investment in shares made by shareholders and identify the ultimate person holding the controlling interest including the change in shareholding, directorship etc. and then take the entire matter to the logical conclusion to bring out the facts on record.
15. However, same had not been done by the AO and hence, the matter was remanded back to the file of AO for de novo assessment and to decide the matter as mandated by the CIT in S. 263 order.

CASE-11

PCIT v. Swananda Properties (P.) Ltd. (2019) 267 Taxman 429 (Bom.)(HC)

SECTION 145 - 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee.

(2) The Central Government may notify in the Official Gazette from time-to-time accounting standards to be followed by any class of assessees or in respect of any class of income.

(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144.

BRIEF FACTS & DECISION

1. The assessee was engaged in the business of property development. During year, the assessee sold several flats and received sale consideration.
2. The AO held that the income on the sale of flats was available to tax in the assessment year 2004-05 and not in the assessment year 2005-06 on the basis that the project was completed in the previous year relevant to the assessment year 2004-05 and not assessment year 2005-06. However, the income offered by assessee for the assessment year 2005-06 was assessed on protective basis.
3. Further, he found that there was suppression of sales value in respect of six flats. Thus, he made an addition on account of suppressed sales value in respect of six flats.
4. CIT(A) partly allowed the assessee's appeal holding that the project was completed in the assessment year 2005-06 and not in the assessment year 2004-05. However, he rejected the books of account under S. 145(3) and completed the assessment on best judgment basis. CIT (A) held that there was an understatement of sales value in respect of all twelve flats as there was suppression of value in all the twelve flats of the project, as the market rate then was Rs. 8,992 per sq. ft. for the assessment year 2005-06. Thus, the above rate of Rs 8,992 per sq. ft. was applied to all the twelve flats to enhance the assessment to certain amount.

APPEAL TO TRIBUNAL

• On appeal Tribunal set aside the order of CIT (A) and held that neither the AO nor the CIT(A) had any material on record to show that the assessee received more than what was shown in the sale deeds.
• Moreover, it held that there was no occasion to apply S. 145(3) so as to reject the books in the absence of any defect in the books on account of being found. Thus, it deleted the enhancement of assessment.

APPEAL TO HIGH COURT

7. On appeal by the revenue, high Court affirmed the order of the Tribunal and also held that, provision introduced with effect from 1-4-2014 for deeming consideration received on sale of goods/assets on basis of stamp duty valuation would be applicable prospectively.

CASE-12

Bengal Peerless Housing Development Co. Ltd. v. DCIT (2019) 69 ITR 217 / 175 ITD 671/ 178 DTR 5 / 199 TTJ 1003 (Kol.)(Trib.)

SECTION 145 : Method of accounting - Project completion - Profit and loss account and Balance sheet is prepared on completion of project, provision for expenses in respect of ancillary work yet to be completed must be taken into consideration - When the payee is not known it is not possible to deduct tax at source on estimated expenditure - Not liable to deduct tax at source - No disallowance can be made.

TRIBUNAL HELD THAT, since in the project completion method, the entire expenses and the entire sales should be shown, it was necessary for the assessee to make provision for estimated expenditure to be incurred in subsequent years on account of minor or miscellaneous work.

Accordingly, the treatment of the assessee in respect of the Method of accounting SECTION 145 estimated expenditure like expenses on minor or miscellaneous work, in its books of account was proper.

Since the assessee had disclosed its entire project receipts of its project in the assessment 2012-13, all the expenses incurred or to be incurred in connection with the project were also considered so as to arrive at the correct net profit from this project.

When the payee is not known it is not possible to deduct tax at source on estimated expenditure the assessee is not liable to deduct tax at source hence no disallowance can be made.

CASE -12

Rajbhushan Omprakash Dixit v. DCIT (2019) 416 ITR 89 / 264 Taxman 222 / 180 DTR

153 (Bom.)(HC)

SECTION 147 - Income escaping assessment - If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year):

Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.

Explanation 1-Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.

Explanation 2- For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:-

(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income- tax.

(b) where a return of income has been furnished by the assessee, but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance, or relief in the return.

(c) where an assessment has been made, but-

(i) income chargeable to tax has been under- assessed; or

(ii) such income has been assessed at too low a rate; or

(iii) such income has been made the subject of excessive relief under this Act; or

(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.

Held that - Reassessment merely on basis of change of opinion was held to be not justified - The fact that the assessee did not disclose the material is not relevant if the AO was otherwise aware of it.

BRIEF FACTS & DECISION

1. Assessment was completed under S. 153A, read with S. 143(3) of the Act. After expiry of four years from end of relevant year, AO initiated reassessment proceedings on Section 147 Reassessment ground that seized documents disclosed that assessee had cash in hand of ` 20 lakhs which did not form part of assessee's return and, thus, escaped assessment.
2. On writ the Court held that AO was in possession of all relevant documents at time of assessment, there being no failure on part of assessee to disclose fully and truly all material facts, initiation of reassessment proceedings merely on basis of change of opinion was not justified.
3. The fact that the assessee did not disclose the material is not relevant if the AO was otherwise aware of it. If the AO had the information during the assessment proceeding, irrespective of the source, but chooses not to utilize it, he cannot allege that the assessee failed to disclose truly and fully all material facts & reopen the assessment.

CASE -13

Referred Dr. Amin's Pathology Laboratory (2001) 252 ITR 673 (Bom.)(HC),

SECTION 147 : Reassessment - After the expiry of four years - Outstanding creditors for more than 10 years - Capital gains - Where the assessee had made the due disclosure, assessment could not be reopened after four years from the end of the Assessment year.

BRIEF FACTS & DECISION

• A notice for reopening of assessment was issued beyond a period of our years from the end of the relevant assessment year on three grounds;
• With respect to the first ground of cessation of liability, the assessee had transferred the outstanding interest in inter-branch accounts to the P&L Account. Since all the relevant details with respect to this issue were already filed in the course of original assessment, there was no failure on the part of the assessee to disclose truly and fully all material facts.
• With respect to the second ground, the assessee had in the original return of income offered a capital gain of Rs. 4.68 crores to tax, which was erroneously written as Rs. 44.68 crore in the assessment order. The assessee filed a rectification application before the AO, which was accepted, and the mistake rectified. In the reopening notice, the AO has contradicted himself by saying that the correct amount of capital gain was not offered to tax. Reopening cannot be sustained on this ground either.
• In the third ground, the AO argued that in calculating dividend distribution tax, the assessee was allowed to deduct only the dividend received from the subsidiaries in the given financial year. With respect to this ground too, the assessee had truly and fully disclosed all the relevant facts in the original assessment proceedings. The reopening was therefore to be quashed.

CASE-14

Kakadia Builders Pvt. Ltd. v. ITO (2019) 412 ITR 128 / 175 DTR 305 / 307 CTR 369 / 262 Taxman 268 (SC)

SECTION 245D OF INCOME TAX ACT,1961

Procedure on receipt of an application under section 245C

(1) On receipt of an application under section 245C, the Settlement Commission shall call for a report from the Commissioner and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application: Provided that an application shall not be rejected under this subsection unless an opportunity has been given to the applicant of being heard: ² Provided further that the Commissioner shall furnish the report within a period of forty- five days of the receipt of communication from the Settlement Commission in case of all applications made under section 245C on or after the 1st day of July 1995 and if the Commissioner fails to furnish the report within the said period, the Settlement Commission may make the order without such report.

(2) A copy of every order under sub- section (1) shall be sent to the applicant and to the Commissioner.

(2A) Subject to the provisions of sub- section (2B), the assessee shall, within thirty- five days of the receipt of a copy of the order under sub- section (1) allowing the application to be proceeded with], pay the additional amount of income- tax payable on the income disclosed in the application and shall furnish proof of such payment to the Settlement Commission.

(2B) if the Settlement Commission is satisfied, on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income- tax referred to in sub- section (2A) within the time specified in that sub- section, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments if the assessee furnishes adequate security for the payment thereof.

(2C) Where the additional amount of income- tax is not paid within the time specified under sub- section (2A), then, whether or not the Settlement Commission has extended the time for payment of the amount which remains unpaid or has allowed payment thereof by instalments under sub- section (2B), the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty- five days referred to in sub- section (2A).

(2D) Where the additional amount of income- tax referred to in subsection (2A) is not paid by the assessee within the time specified under that sub- section or extended under sub- section (2B), as the case may be, the Settlement Commission may direct that the amount of income- tax remaining unpaid, together with any interest payable thereon under subsection (2C), be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered, in accordance with the provisions of Chapter XVII, by the Assessing Officer having jurisdiction over the assessee.

(3) Where an application is allowed to be proceeded with under subsection (1), the Settlement Commission may call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case.

(4) After examination of the records and the report of the Commissioner received under sub- section (1), and the report, if any, of the Commissioner received under sub- section (3), and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub- section (1) or sub- section (3).

(5)Subject to the provisions of section 245BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the concerned Bench before passing any order under sub- section (4) and, in relation to the passing of such order, the provisions of section 245BD shall apply.

(6) Every order passed under sub- section (4) shall provide for the terms of settlement including any demand by way of ² tax, penalty or interest], the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts.

(6A) Where any tax payable in pursuance of an order under sub- section (4) is not paid by the assessee within thirty- five days of the receipt of a copy of the order by him, then, whether or not the Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by instalments, the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty- five days aforesaid.

(7) Where a settlement becomes void as provided under sub- section (6), the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the income- tax authority concerned may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before the expiry of two years from the end of the financial year in which the settlement became void.

(8) For the removal of doubts, it is hereby declared that nothing contained in section 153 shall apply to any order passed under sub- section (4) or to any order of assessment, reassessment or recomputation required to be made by the ⁵ Assessing] Officer in pursuance of any directions contained in such order passed by the Settlement Commission ¹ and nothing contained in the proviso to sub- section (1) of section 186 shall apply to the cancellation of the registration of a firm required to be made in pursuance of any such directions as aforesaid.

Held That: Settlement Commission does not have power to reduce or waive interest statutorily payable under S.234A, 234B and 234C of the Act - Matter remanded to Settlement Commission.

BRIEF FACTS & DECISION

1. Settlement Commission while passing the order u/s. 245D(4) made certain addition and also waived the interest levied u/s. 234A, 234B and 234C of the Act.
2. On a rectification application filed by the revenue the Settlement Commission partly allowed the application.
3. Being aggrieved by the order of Settlement Commission the assessee filed two writ petitions before the High Court.
4. High Court set aside the rectification order passed by the Settlement Commission.
5. Revenue aggrieved by the order of Settlement Commission filed two petitions before the High Court.
6. High Court reversed the waiver of interest in terms of Settlement Commission 's direction contained in its order dt 11-10-2002.
7. On appeal the Court held that, when Settlement Commission passed first order disposing of assessee's application, issue with regard to powers of Commission was not settled by any decision of Apex Court.
8. Decisions in CIT v. Anjum M.H. Ghaswala (1997) 252 ITR 1 (SC) and Brij Lal v. CIT (2010) 328 ITR 477 (SC), were rendered after Settlement Commission passed order in present case.
9. Therefore, Commission had no occasion to examine issue in question in the context of law laid down by this Court in those two decisions. High Court instead of going into merits of issue, should have set aside original order passed by Commission and remanded case to Commission for deciding issue relating to waiver of interest payable under S. 234A, 234B, and 234C afresh.
10. High Court failed to see that order of Commission was already set aside by High Court itself in first round in light of law laid down by in case of Brijlal wherein, it was laid down that Commission had no power to pass orders u/s. 154.
11. Order passed by Settlement Commission to extent it decided issue in relation to waiver of interest was set aside and case was remanded to Commission to decide issue afresh.
12. Settlement Commission in exercise of its power under S. 2 45D(4) and (6) does not have the power to reduce or waive interest statutorily payable under S. 234A, 234B and 234C, except to the extent of granting relief under the circulars issued by the Board under S. 119 of the Act.
13. Matter remanded to settlement Commission.

CASE -15

(WP No. 1004 of 2017 dt 21-06-2018) PCIT v. ITSC (2019) 311 CTR 284 (Bom.)(HC)

Held that : - Settlement recorded by the Commission on consent of the parties - Dept cannot challenge the order which is passed by consent.

BRIEF FACTS & DECISION

• Dismissing the petition of the revenue, the Court held that when the order is passed by the Commission on consent of the parties Department cannot challenge the order.
• Settlement Commission S. 245D Relied on State of Maharashtra Versus. Ramdas Shrinivas Nayak and another, reported in (1982) Supreme Court Cases 463, the Apex Court had observed in para-4 as under :-

"4. When we drew the attention of the learned Attorney General to the concession made before the High Court, Shri A. K. Sen, who appeared for the State of Maharashtra before the High Court and led the arguments for the respondents there and who appeared for Shri Antulay before us intervened and protested that he never made any such concession and invited us to peruse the written submissions made by him in the High Court.

We are afraid that we cannot launch into an inquiry as to what transpired in the High Court. It is simply not done. Public Policy bars us. Judicial decorum restrains us. Matters of judicial record are unquestionable. They are not open to doubt. Judges cannot be dragged into the arena. "Judgments cannot be treated as mere counters in the game of litigation"

• Per Lord Atkinson in Somasundaran v. Subramanian, [A.I.R 1926 P.C. 136]- We are bound to accept the statement of the Judges recorded in their judgment, as to what transpired in court. We cannot allow the statement of the judges to be contradicted by statements at the Bar or by affidavit and other evidence. If the judges say in their judgment that something was done, said or admitted before them, that has to be the last word on the subject. The principle is well settled that statements of fact as to what transpired at the hearing, recorded in the judgment of the court, are conclusive of the facts so stated and no one can contradict such statements by affidavit or other evidence. If a party thinks that the happenings in court have been wrongly recorded in a judgment, it is incumbent upon the party, while the matter is still fresh in the minds of the judges, to call attention of the very judges who have made the record to the fact that the statement made with regard to his conduct was a statement that had been made in error.
• Per Lord Buckmaster in Madhusudan v. Chanderwati, A.I.R. 1917 P.C. 30). That is the only way to have the record corrected. If no such step is taken, the matter must necessarily end there. Of course a party may resile and an appellate Court may permit him in rare and appropriate cases to resile from a concession on the ground that the concession was made on a wrong appreciation of the law and had led to gross injustice; but, he may not call in question the very fact of making the concession as recorded in the judgment."

CASE-16

Hareshkumar Becharbhai Patel v. JCIT (2019) 69 ITR 73 (SN) (Ahd.)(Trib.)

SECTION 271D OF INCOME TAX ACT,1961-

(1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section-269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.

SECTION 269 SS: Mode of taking or accepting certain loans, deposits and specified sum.

No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if,—

(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or

(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or

(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more:

Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by,—

(a) the Government;

(b) any banking company, post office savings bank or co-operative bank;

(c) any corporation established by a Central, State or Provincial Act;

(d) any Government company as defined in clause (45) of section-2 of the Companies Act, 2013 (18 of 2013);

(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:

Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act.

Explanation.—For the purposes of this section,—

(i) "banking company" means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section-51 of that Act;

(ii) "co-operative bank" shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949) ;

(iii) "loan or deposit" means loan or deposit of money;

(iv) "specified sum" means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.

Held that : Sum initially advanced as loan by father to son, but later treated as gift transaction cannot be subject to Section 269SS - levy of penalty is not justified.

BRIEF FACTS & DECISION

• The assessee, an individual, was engaged in the business of share trading.
• In AY 2008-09 he received a sum of Rs. 2.54 lakhs in cash on different dates from his father.
• Assessee contended that the amount so received in cash is gift. In support of same, assessee submitted gift deed prepared on 17-5-2011.
• The Assessing Officer observed that the gift was received in financial year 2007-08 whereas the gift deed was made on May 17, 2011, prepared on stamp paper purchased on May 16, 2011.
• AO held that the cash accepted was contravention of the provisions of Section 269SS of the Income-tax Act, 1961 and he levied penalty U/s. 271D.
• The CIT(A) affirmed the penalty.
• Aggrieved, assessee filed an appeal before the ITAT.
• The Tribunal observed that the AO had not doubted the genuineness of the transaction as no addition was made U/s. 68.
• The provision of S. 269SS was brought under the statue to discourage the assessee to justify their unaccounted money. However, in the case on hand, there is no allegation that the Section 271D Penalty assessee has introduced unaccounted money in his business.
• Relying on the decision of G. D. Subraya Sheregar v. ITO (10 SOT 378), observed that the expression "any other person" appearing in Section 269SS has been interpreted by the two Benches of the Tribunal in two different ways.
• One view is that the said expression excludes all those persons who are closely connected with the assessee and the other view is to the opposite effect. Both views are possible views. It is well-settled that there are two possible views, the view favourable to the assessee needs to be accepted.
• The Tribunal held that such cash transaction, between father and son, which are genuine cannot be brought under the net of tax under the provision of Section 269SS of the Act.
• The Tribunal went further to hold that, even if it was given as loan at that relevant time and later on the parties agreed to treat as gift, then the matter ends here as the transaction was between son and father which was substantiated with gift deed and confirmation.
• Section 271D applies on accepting loans & deposits. There is the basic difference between the gift and loan/Deposit. A gift is never paid back/returned to the donor while it is not so in the case of the loan.
• The Tribunal observed that there was nothing on record to shows that money was paid back to the father by the assessee directly or indirectly.
• Penalty levied U/s. 271D was thus deleted.

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