- Tribunal held that in view of absence of ‘Additional Commissioner’ in definition contained in section 2(7A), an Additional Commissioner could not be an authority to exercise or perform all or any of powers and functions of an Assessing Officer to make an assessment of income, and, accordingly, quashed assessment made by that authority - Whether in view of order of Delhi High Court in CIT v. Bindal Apparels [IT Appeal No. 1706 of 2006, dated 24-8-2007], Tribunal was justified in taking above view - Held, no - CIT v. Neeru Gambhir (Delhi)

Jurisdiction of

- Assessment year 1992-93 - Whether in terms of section 124(3)(b), jurisdiction of an Assessing Officer cannot be called in question by an assessee after expiry of one month from date of which he was served with a notice under section 142(1) or after completion of assessment, whichever was earlier - Held, yes - Subhash Chander v. CIT (Punj. & Har.)

Assessment

Additions to income

- Assessment year 1982-83 - Assessing Officer found that value of closing stock, debts and advances declared by assessee in books of account was lesser as compared to value declared to bank in that regard and, therefore, he made addition of difference of these two values in assessee’s income - There was no finding by Assessing Officer as to whether there was any discrepancy in quantity of stock as stated to bank and as stated in books - Appellate authorities deleted addition - Whether Assessing Officer could not have made addition merely with reference to variation in two valuations without coming to conclusion that there was actual variance in quantity of stock and without finding as to when such discrepancy in quantity of stock as declared to bank and as stated in books, if at all, occurred - Held, yes - Whether, therefore, appellate authorities could not be faulted with in deleting such addition - Held, yes - CIT v. Udaipur Chemicals & Fertilisers (P.) Ltd. (Raj.)

Bad debts

- Assessment year 1995-96 - Assessee-company had advanced large sums on interest to its subsidiary companies - Although it did not receive said interest, yet it accounted for same on accrual basis and offered interest to tax - In light of irrecoverable nature of same, assessee had chosen to write it off - Subsidiary companies merged with assessee-company with effect from 1-4-1994 pursuant to order of Court passed on 26-6-1995 - Assessing Officer held that in light of merger with effect from 1-4-1994, assessee and subsidiary company became one and in that view of matter there existed no debt at all for parties to write off interest on such debts - Whether retrospective effect given to amalgamation would not nullify decision with regard to writing off of interest which was taken prior to amalgamation had taken place and, therefore, claim of assessee was allowable - Held, yes - CIT v. United Breweries Ltd. (Kar.)

Block assessment in search cases

Computation of undisclosed income

- Whether section 158BB is required to be read with section 4 - Held, yes - CIT v. Suresh N. Gupta (SC)

Tax in case of

- Block period 1991-92 to 2000-01 - On 17-1-2001 a search under section 132 was carried out at premises of assessee which unearthed certain undisclosed income - Assessing Officer computed tax thereon at 60 per cent in terms of section 113 and also levied surcharge at 17 per cent on amount so taxed - Assessee challenged levy of surcharge in appeal before Commissioner (Appeals) - Commissioner (Appeals) allowed assessee’s appeal - Decision of Commissioner (Appeals) was confirmed by Tribunal and High Court - Whether since even without proviso to section 113 (inserted vide Finance Act, 2002 with effect from 1-6-2002), Finance Act, 2001 was applicable to block assessment under Chapter XIV-B in relation to search initiated on 17-1-2001, surcharge was leviable at rate of 17 per cent on amount of tax computed - Held, yes - CIT v. Suresh N. Gupta (SC)

- Block period 1991-92 to 2000-01 - Whether proviso inserted in section 113 by Finance Act, 2002 is clarificatory in nature as it clarifies that relevant date for applicability of Finance Act would be year in which search stood initiated under section 158BC - Held, yes - CIT v. Suresh N. Gupta (SC)

Undisclosed income of any other person

- Whether where revenue could not produce satisfaction recorded by concerned Assessing Officer in terms of section 158BD, in view of decision of Supreme Court in Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341/159 Taxman 258 block assessment proceeding, against assessee could be sustained - Held, no - CIT v. Feather Breweries & Market (Delhi)

Business disallowance

Excessive or unreasonable payments

- Assessment year 1992-93 - Whether provisions of section 40A(2) are applicable to a co-operative society - Held, no - CIT v. Manjara Shetkari Sahakari Sakhar Karkhana Ltd. (Bom.)

Business expenditure

Allowability of

- Assessment year 1992-93 - Assessee, a co-operative society, purchased sugarcane from members of society as well as from non-members at State Advice Price (SAP) which was higher than Statutory Minimum Price (SMP) fixed by Central Government - Revenue held that SAP fixed by State Government exceeded fair market value and, hence, was liable to be disallowed - It also held that SAP was determined on basis of price recommended by assessee after finalisation of accounts and, therefore, differential amount between SAP and SMP being appropriation of profits and in nature of ‘bonus’ under section 2(4) of 1960 Act was liable to be disallowed - Whether though under 1960 Act, assessee was bound to pay SMP fixed by Central Government, yet it was also bound to pay final cane price as per SAP fixed by State Government and, therefore, it could not be accused of paying to cane growers in excess of fair market price - Held, yes - Whether appropriation of profits would arise only after profits are determined - Held, yes - Whether since in instant case neither profits were determined nor there was any resolution passed in AGM to distribute profits in form of higher cane price/bonus, final cane price paid at rate fixed by State Government could not be said to be distribution of profits/bonus and, consequently, no disallowance could be made in that behalf - Held, yes - CIT v. Manjara Shetkari Sahakari Sakhar Karkhana Ltd. (Bom.)

Circulars and Notification

- Circular No. 729, dated 1-11-1995

Deductions

Exporters

- Whether interest earned by assessee, an exporter, on FDRs kept with bank for purpose of margin money as a condition for availing credit facilities could not be termed as business income but income from other sources and, therefore, same should not be included in profits and gains of business in terms of Explanation (baa)(1) to sub-section (4A) of section 80HHC - Held, yes - Kashmir Arts v. CIT (Delhi)

Profits and gains from industrial undertakings other than infrastructure development undertaking

- Whether process of cutting and sawing or sizing or polishing of marble blocks into slabs and tiles which results in making raw marble usable, amounts to manufacture of thing or article within meaning of section 80-IA/80-IB and assessee engaged in said process is entitled to deduction under section 80-IA/80-IB - Held, yes - Arihant Tiles & Marbles (P.) Ltd. v. ITO (Raj.)

Profits and gains from new industrial undertakings, ships or hotels, etc.

- Assessment year 1968-69 - Whether, in view of rule 19A, assessee is to be given benefit of borrowed capital for purposes of section 80J - Held, yes - J.K. Synthetics Ltd. v. CIT (Delhi)

High Court, reference to

- Assessment year 1979-80 - According to law laid down by Supreme Court in Oil & Natural Gas Commission v. Collector of Central Excise [1994] 116 CTR 643, clearance of High-Powered Committee should be obtained within a month of filing an appeal or a petition, and such approval would be required at every stage of litigation - Whether in view of law laid down by Supreme Court, delay in revenue’s approaching Committee on Disputes (COD) for approval could not be condoned, and, thus, COD’s approval having not been obtained by revenue for pursuing matter in question, reference had to be returned unanswered - Held, yes - CIT v. International Airports Authority of India (Delhi)

Income

Chargeable as

- Assessment year 1996-97 - Whether interest received by assessee on compensation amount under arbitration award was revenue receipt liable to be taxed - Held, yes - Whether as interest amount received by assessee under arbitration award pertained to a period ranging to six years, entire amount of interest could not be assessed in year of receipt inasmuch as interest income accrued from year to year - Held, yes - Konkan Barge Builders (P.) Ltd. v. ITO (Bom.)

Income escaping assessment

Issue of notice for

- Assessment year 1996-97 - Whether where assessee was not served with notice under sections 147 and 148, proceedings for assessment were void - Held, yes - CIT v. Harish J. Punjabi (Delhi)

Income-tax Act, 1961

- Section 2(7A)

- Section 4

- Section 36(1)(vii)

- Section 37(1)

- Section 37(3A)

- Section 40A(2)

- Section 69C

- Section 80HHC

- Section 80-IB

- Section 80J

- Section 113

- Section 115J

- Section 124

- Section 143

- Section 148

- Section 158BB

- Section 158BD

- Section 256

- Section 263

- Section 271(1)(c)

Penalty

For concealment of income

- Assessment year 2001-02 - Penalty was set aside by Tribunal on ground that Assessing Officer had not recorded any satisfaction in assessment order regarding concealment of income or for furnishing inaccurate particulars by assessee - Tribunal relied on decision of Delhi High Court in CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568/[2002] 122 Taxman 620 - There was endorsement in assessment order to effect that penalty proceedings under section 271(1)(c) were being initiated separately for furnishing inaccurate particulars - Assessing Officer had also made a note of failure on part of assessee to explain source of credits in her bank account, and that she adduced no evidence to support genuineness of such credits - Whether Tribunal was justified - Held, no - CIT v. Smt. Santosh Sharma (Delhi)

- Assessment years 1995-96 and 1996-97 - Whether where on detailed perusal of assessment order, no satisfaction of Assessing Officer that penalty proceedings were required to be initiated against assessee was discernible, penalty proceedings could be sustained - Held, no - CIT v. Chohal Investments Ltd. (Delhi)

- Assessment year 2000-01 - On question whether rental income received by assessee was to be assessed under head ‘Income from house property’ or under ‘Business income’, Commissioner (Appeals) held that two views were possible and since there was no clear and definite inference that could be drawn one way or other, assessee could not be said to have concealed its income or furnished inaccurate particulars, and that evidence led by assessee could not be said to be mala fide or false - Tribunal concurred with said finding - Whether since in assessment order there was nothing to suggest that Assessing Officer was satisfied that assessee had in any way either concealed particulars of its income or had furnished inaccurate particulars or had deliberately failed to comply with any notice or direction issued by Assessing Officer, Tribunal was justified - Held, yes - CIT v. Regency Express Builders (P.) Ltd. (Delhi)

Revision

Of orders prejudicial to interests of revenue

- Assessment year 1984-85 - Subsequent to completion of original assessment, Commissioner in exercise of power conferred under section 263 remanded matter to Assessing Officer with direction to reframe assessment after making relevant and appropriate enquiries with respect to unexplained share capital which was stated to have been introduced in assessee’s books - Tribunal quashed order of Commissioner - Meanwhile, pursuant to Commissioner’s order, Assessing Officer reframed assessment and made additions - However, Commissioner (Appeals) deleted addition - Tribunal upheld deletion for reason that Commissioner’s order under section 263 which constituted basis for making addition by Assessing Officer itself had been quashed - Whether question as to whether Commissioner’s order under section 263 was sustainable or not, had become academic and, therefore, reference was to be returned unanswered - Held, yes - CIT v. Flamingo Finance & Investment (Delhi)

- Assessment years 1984-85 to 1992-93 - Whether in revision Commissioner is competent to examine legality and validity of directions issued by Deputy Commissioner under section 144A, on basis of which order of assessment has been passed by Assessing Officer - Held, yes - Daulatram Chhotwani v. CIT (MP)

Sales promotion expenses

- Assessment year 1980-81 - Whether in view of decision of Delhi High Court in CIT v. High Blyma Labs (P.) Ltd. [IT Appeal No. 34 of 1992, dated 5-7-2007], Tribunal was correct in holding that expenditure on account of annual bonus paid to dealers was not in nature of ‘Sales Promotion’ expenses and provisions of section 37(3A) were not applicable - Held, yes - CIT v. Khetu Ram Bishamber Das (Delhi)

Unexplained expenditure

- Assessment years 1981-82 and 1984-85 - Whether where assessee had no explanation regarding source of funds for unaccounted purchases, additions made under section 69C was justified - Held, yes - Grand Bazzar v. Asstt. CIT (Mad.)

Wealth-tax

Assessing Officer

Jurisdiction of

- Assessment year 1978-79 - Whether where return of wealth was filed by assessee voluntarily; notice under section 16(2) was served; and up till stage of assessment no objection whatsoever was taken by assessee relating to jurisdiction of Wealth-tax Officer concerned, it would be presumed that assessee had acquiesced in jurisdiction of that Wealth-tax Officer and, therefore, he could not be permitted to raise such objection subsequently - Held, yes - CWT v. Ravi Malhotra (All.)

Net wealth

Asset belonging to assessee

- Assessment years 1988-89 and 1989-90 - Assessee had received additional compensation for acquisition of her land and it was held by her on valuation date - Tribunal held that said amount of compensation was not includible in value of assets held by assessee on valuation date on ground that said amount was in dispute in appeal filed by State Government and that said amount had been released against security - Whether since ground taken by Tribunal for not including amount of compensation in value of assets held by assessee on valuation date was not correct interpretation of law, amount of compensation received by assessee was liable to wealth-tax on valuation date - Held, yes - CWT v. Mrs. Manjit Kaur (Punj. & Har.)

Wealth-tax Act, 1957

- Section 2(m)

- Section 11

Zero-tax companies

- Assessment year 1988-89 - Whether unabsorbed depreciation to be carried forward should be enhanced by an amount equal to income assessed to tax under section 115J - Held, no - CIT v. Nicco Uco Alliance Credit Ltd. (Mad.)

magazine

features

q authority for advance rulings

v. swaminathan, FCA

- Tax treaties and AAR - A critique

q business expenditure

t.n. pandey, Ex-Chairman, CBDT

- Deductions under section 37(1) of the Income-tax Act, 1961 - Practical, pragmatic and liberal thinking is necessary

q rectification of mistakes

harish kumar sud, Advocate

- Mistakes which can be rectified under section 154/254

q miscellanea

- Article browser

case digest/itat

q table of cases digested

BPL Sanyo Finance Ltd. v. Dy. CIT (Bang. - Trib.)

Dy. CIT v. Ajit Singh (HUF) (Delhi - Trib.)

q subject index to cases digested

Income-tax

Block assessment in search cases

Undisclosed income of any other person

- Block period ending 18-2-1997 - A search under section 132(1) took place at residence of one ‘MS’ on 18-2-1997, and as a consequence of same, assessment under section 158BC on ‘MS’ was made by Deputy Commissioner, on 26-2-1999 - Subsequently, on 24-8-2001, a notice was issued under section 158BD by Deputy Commissioner, calling upon assessee to submit return of his undisclosed income within 15 days of service of notice - As a consequence assessment under Chapter XIV-B was framed by Assistant Commissioner, on 29-8-2003 under section 158BC, read with section 158BD - Assessee’s case was that notice issued under section 158BC, read with section 158BD, required assessee to file return of income within 15 days and, therefore, same was contrary to mandatory provisions of section 158BC which required time allowed to assessee to furnish return of income should not be less than 15 days; and satisfaction as contemplated under section 158BD so as to rope in provisions of Chapter XIV-B was recorded by Assessing Officer in year 2001 which was to be done before finalization of assessment under section 158BC in case of person put to search - Whether assessee’s case was to be accepted - Held, yes - Dy. CIT v. Ajit Singh (HUF) (Delhi - Trib.)

Penalty

For concealment of income

- Assessment year 1997-98 - Assessee-company carrying on business of financing and leasing - Under an agreement assessee leased special grade cast iron rolls (SGCI rolls) to ‘BSAL’ on basis of documents produced by ‘BSAL’ - Said SGCI rolls were procured by ‘BSAL’ itself - Lease rent was payable in 12 equal quarterly instalments - Assessee claimed depreciation on leased assets and same was allowed - Upon survey at BSAL’s premises, it was found that lease agreement was not genuine and assessee claimed depreciation on non-existent assets - Assessee agreed for disallowance of depreciation - Assessing Officer disallowed depreciation and also levied penalty under section 271(1)(c) on ground that depreciation was claimed on bogus lease transaction which amounted to concealment of particulars of income attracting penalty under section 271(1)(c) - Assessee’s case was that when agreement was entered into it was under bona fide belief that entire transaction was genuine transaction - Whether, in view of facts that it could not be said that when assessee claimed depreciation, same was either not admissible under law or that it was aware that assets were not existing, penalty could not be levied - Held, yes - BPL Sanyo Finance Ltd. v. Dy. CIT (Bang. - Trib.)

Income-tax Act, 1961

- Section 158BD

- Section 271(1)(c)

special leave petitions decided by supreme court of india

Table of cases

A.P. State Financial Corpn. v. CIT

Asstt. CIT v. Jaramroz Narimn Lakdawala

Asstt. CIT v. Radheshyam Goyal

CIT v. Amiens & Plasticizers Ltd.

CIT v. Asha Devi Lasod

CIT v. Cello Plastic Products

CIT v. Chandrakanth H. Koticha

CIT v. Globe Machine Tools Mfg.

CIT v. Jhonson Electric (P.) Ltd.

CIT v. Ladkunwar Kanthed

CIT v. Legal Heirs of Late S.R. Pandit

CIT v. Motor Industries Co. Ltd.

CIT v. Nirma Industries Ltd.

CIT v. Pradeshiya Ind. & Invest. Corpn. Ltd.

CIT v. Pratap Chand (D.)

CIT v. Pushpaben B. Koticha

CIT v. Raghuraj Singh Chordia

CIT v. Ravinder Kumar

CIT v. Reliance Exports Ltd.

CIT v. Royal Corporation

CIT v. Royal Enterprises

CIT v. Satyanarayan Garg

CIT v. Shiv Kumar

CIT v. Shubax Construction

CIT v. Thirani Chemicals Ltd.

CIT v. Vikas Agencies

CWT v. Gujarat Electricity Board

DIT v. Sadharmik Utakarsha Trust

TAXMAN

Vol. 166, Part 3, for the week of January 19 – January 25, 2008