2019-TIOL-174-HC-DEL-IT
ORCHID INFRASTRUCTURE DEVELOPERS PVT LTD Vs UoI: DELHI HIGH COURT (Dated: January 17, 2019)
Income Tax - Writ - Sections 234B(2A), 245C(1), 245D(1) & 245D(4).
Keywords - Amendments - Pending proceedings - Retrospective in nature.
The Assessee's application for settlement u/s 245C(1) was admitted by the Settlement Commission. However, the Settlement Commission in its order u/s 245D(4) had made addition to the amount which was already disclosed to the Settlement Commission. Accordingly, the assessee was liable to pay tax on the enhanced amount. Thus, the assessee challenged the levy of interest on the additional tax payable u/s 234B(2A).
In writ, the High Court held that,
Whether the provisions of Sec 234B(2A) will apply even to pending proceedings - YES: HC
++ the sec. 234B(2A) is to be examined whether it would be applicable to pending proceedings. Clause (a) of such Sub-Section (2A) states that where an application under Sub-Section 245C for any assessment year has been made, the assessee shall be liable to pay simple interest at the rate specified for every month or part of the month comprised in the period commencing on 1st day of April of the assessment year and ending with the date of making such application. Clause (b) states that as a result of order of the Settlement Commission u/s 245 D(4) the amount of total income disclosed in the application u/s 245C(1) is increased, the assessee would be liable to pay simple interest for every month or part of the month comprised in the period commencing from 1st day of April of such assessment year and ending with the date of the order on the amount by which the tax on the total income determined on the basis of such order exceeds the tax on the total income disclosed in the application filed u/s 245C(1) of the Act;
++ the provision clearly uses the present tense i.e. where application u/s 245C(1) of the assessment year has been made. Clause (a) is therefore clearly intended to cases where application was pending and orders had not been passed when sub-section (2A) to Section 234B was enacted. Clause (b) refers to the date of order as a result of u/s 245D(4) of the Act, which should be after insertion of sec. 234B(2A) of the Act. Thus, it would follow that the amendment was intended to apply to all pending proceedings in which orders u/s 245 D(4) are passed after sub-section (2A) was introduced and made part of the Statute. The intendment of the legislature is therefore, clear and it would apply to pending proceedings. Therefore the second principle as per the dictum is applicable. Accordingly, the Court held that sec. 234B(2A) would be applicable to all proceedings in which orders are pending and or in which orders u/s 245 D (4) are passed on or after 1st June, 2015.
Writ petitions dismissed
2019-TIOL-173-HC-DEL-IT
CIT Vs BHANOT CONSTRUCTION AND HOUSING LTD: DELHI HIGH COURT (Dated: January 17, 2019)
Income Tax – Sections 40(a)(ia) & 201.
Keywords - Declaratory - curative in nature - Provisio - Retrospective effect - TDS.
THE assessee-company, engaged in the business of civil construction, real estate, sale –purchase and infrastructure development, filed its return of income. During the assessment proceedings, the AO had disallowed claim of the assessee u/s 40(a)(ia) for failure to deposit TDS on or before due date of filing of return. Accordingly, expenditure paid by the assessee to M/s Arch Infrastructure Projects Nirman Private Limited was disallowed. On appeal, the CIT (A) deleted the addition and the same was upheld by the Tribunal.
On appeal, the High Court held that,
Whether when an amendment is curative in nature it has to be retrospective - YES: HC
Whether when the due date for deposit of TDS was a bank holiday, followed by a national holiday, the payment made by the assessee with interest on the next working day does not call for any disallowance u/s 40(a)(ia) - YES: HC
++ the TDS deducted by the assessee on account of payment made to M/s Arch Infra Projects Nirman Ltd. was deposited in the government account on 03.10.2011, which in case of the assessee was beyond the due date of filing of return of income for the relevant AY. However, diligence of the Act for disallowance of payment in such cases as mandated u/s 40(a) (ia) has been softened in terms of first proviso to section 201, with effect from 01.07.2012. The contention of the Revenue is that the second proviso to Section 40(a)(ia) has been made applicable with effect from 1st April, 2013 and is not retrospective;
++ the Delhi High Court had examined and interpreted this contention in the case of Commissioner of Income Tax-1 versus Ansal Land Mark Township (P) Limited and held that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004;
++ additional facts which must be noticed and was referred to by the CIT(A) in his order, were that, last date for filing of return for the AY 2011-12 was 30th September, 2011, which was Friday and a bank holiday. 2nd October was also a national holiday. On 3rd October, 2010 assessee had deposited tax at source, and had paid interest for the delay in deposit of TDS of two days. Therefore, in these circumstances, the Revenue should have exercised its discretion and accepted the order of the Tribunal, given the peculiar facts of the present case where there was substantive compliance by the assessee. Thus, as the issue in the present case is already covered against the Revenue, by decision of this Court in Ansal Landmark Township (P) Limited, no substantial question of law arises for consideration.
Revenue's appeal dismissed
2019-TIOL-172-HC-DEL-IT
PR CIT Vs NDR PROMOTERS PVT LTD: DELHI HIGH COURT (Dated: January 17, 2019)
Income Tax - Sections 68, 132 & 133(6)
Keywords - Genuineness of transactions - make-believe transaction - Returns from investment - Substantial investments - Test of human probabilities - Unexplained cash credit
DURING the relevant AY, the assessee-company received share capital from seven companies. On assessment, the AO opined that five of the seven companies had been created & were being operated by one individual, for providing accommodation entries. The suspicions of the AO were confirmed when evidence & details were collected during Search premises conducted at the premises of this kingpin individual. The AO observed that these companies did not carry out any genuine business activities & its directors were employees of the suspected individual. Entries in the books of accounts were also found to be bogus. Thus the AO directed the assessee-company to secure the presence of the directors in the five suspect firms, for purpose of examination. The latter was also directed to produce relevant papers pertaining to issue of shares and other details. The assessee failed to produce the directors of the suspected firms & also could not submit the relevant documents as called for by the AO. However, it submitted other details such as copies of the ledger account of share application, bank statements, ledger account of share capital, balance sheet, P&L a/c and other sundry details. The AO made additions of about Rs 1.51 crores, being the share premium received from these five firms.
On appeal, the CIT(A) deleted such additions, observing that the assessee established the identity & creditworthiness of the creditors as well as the genuineness of the transactions. It was held that once details like PAN & bank account details were furnished, the onus shifted on the AO to reach out to the shareholders. The CIT(A) also held that such burden would not pass on to the assessee if the summons issued to the shareholders were returned unserved. On further appeal, the Tribunal dismissed the Revenue's appeal.
On appeal, the High Court held that,
Whether when huge investments are made without paying attention to returns and safety of the funds, such a business behaviour goes against the principles of human probabilities - YES: HC
Whether such a case involving make-believe paper work to camouflage the bogus nature of the transactions is to be treated as unexplained credit u/s 68 - YES: HC
++ the present case would clearly fall in the category where the AO had not kept quiet and had made inquiries and queried the assessee to examine the issue of genuineness of the transactions. The Tribunal unfortunately did not examine this aspect and also overlooked several facts, namely that the five shareholder companies were all located at a common address. The Tribunal also omitted to consider the evidence & material on bogus transactions found during the Search proceedings conducted at the premises of the kingpin individual. Such material pointed towards accommodation entries provided to various beneficiaries;
++ the transactions in question were clearly sham and make-believe with excellent paper work to camouflage their bogus nature. Accordingly, the order passed by the Tribunal is clearly superficial and adopts a perfunctory approach and ignores evidence and material referred to in the assessment order. The reasoning given is contrary to human probabilities, for in the normal course of conduct, no one would make investment of such huge amounts without being concerned about the return and safety of such investment. Hence the issue framed is answered in favor of the Revenue.
Revenue's appeal allowed
2019-TIOL-171-HC-DEL-IT + Case Story
PR CIT Vs ORACLE (OFSS) BPO SERVICES LTD: DELHI HIGH COURT (Dated: January 17, 2019)
Income tax - Sections 10A(5), 40(a)(i) & 80A(5).
Keywords - BPO Service - Form 56F - Interest on FDs - Multiple claims of deductions - suo moto disallowance -
The assessee was engaged in the business of providing 'Processing Outsourcing Services', during the assessment year. In its return it had claimed deduction of Rs 17.87 crores under Section 10A of the Act with NIL taxable income under the head of 'income from business and profession'. In order to claim deduction under Section 10A the assessee had filed Form 56F along with its return. In addition, assessee, had earned income of Rs.19.66 lakhs on fixed deposit receipts from banks, which it declared as income under the head 'Other Sources'. Accordingly, the net taxable income was Rs.19.68 lakhs.
During the assessment the assessee had filed a revised computation of income making suo motu disallowance of Rs.2,14,50,610/- and allowance of Rs.33,25,522/- from business income as declared which it claimed was inadvertently missed out. Exemption under Section 10A of the Act was accordingly revised with corresponding disallowance and allowance of Rs.2,14,50,610/- and Rs.33,25,522/- respectively. Revised Form 56F was filed.
The Assessing Officer reduced the amount of Rs.6,13,047/- i.e. the provision for leave encashment claimed on payment basis from the disallowance of Rs.2,14,50,610/- and treated the balance amount of Rs.2,08,37,563/- as income under the head income from 'Other Sources'. Assessing Officer did not allow allowance of Rs.1,01,701/- on account of provision of bonus under Section 43B of the Act, Rs.25,83,809/- as expenditure allowable under Section 40(a) (i) of the Act, as it was disallowed in the previous year; and Rs.21,607/- as profit on sale of fixed assets and Rs.5,358/- on account of foreign exchange gain on capital expenditure.
On appeal, the CIT(A) held that the findings of the Assessing Officer were contradictory for he had partly accepted the revised computation by allowing expenditure of Rs.6,13,047/- towards leave encashment, but had disallowed other allowances claimed by the assessee in the revised computation. Contradiction was there as the Assessing Officer had considered the revised computation only to the extent it was beneficial to the Revenue, but no deduction of allowances claimed in revised computation was made. He also made adverse comments on self-disallowance of Rs.2,14,50,610/- with adjustment/ deduction of Rs.6,13,047/- i.e. Rs.2,08,37,563/- being treated as income from other sources and not disallowance under the head business income. He allowed the appeal filed by the assessee, by accepting the revised computation of income furnished by it during the course of the assessment proceedings.
Revenue's appeal was dismissed and the Tribunal held that the assessee was indisputably eligible for deduction under Section 10A and the revised computation was filed when the assessment proceedings were in progress.
On appeal, the HC held that,
Whether when the assessee is entitled to Sec 10A benefits, any disallowance made or deduction denied by the AO which would lead to enhancement of business income, would be revenue neutral - YES: HC
++ the Revenue does not dispute the correctness of the revised computation made by the assessee. Revenue also does not dispute and has not challenged that the disallowance made by the assessee in the revised computation of Rs.2,14,50,610/- cannot be adjusted and treated as income taxable under the head 'Income from Other Sources'. This disallowance has to be under the head 'profit and gains from business', which was entitled to deduction /exemption under Section 10A of the Act. The disallowance made would result in enhancement of the business income which was exempted under Section 10A of the Act. It would not be taxable. This would be the position even if the assessee had not filed the revised computation and an enhancement or disallowance had been made by the Assessing Officer in the course of the assessment proceedings. Thus, the disallowance made was revenue neutral;
++ for what reason the Assessing Officer had set off Rs.6,13,047/-, i.e. suo motu allowance made by the assessee for leave encashment claimed on payment basis in the revised computation from Rs.2,14,50,610/- and had treated the figure of Rs.2,08,37,563/-, as income disallowed under the head as income from other sources. The position just cannot be accepted and justified;
Whether the ratio of SC decision in the case of Goetze India Ltd relating to making new claims also bars the revised computation of deductions already claimed - NO: HC
++ decision in Goetze (India) Ltd. barring an assessee from making a claim for deduction by filing revised computation has to be examined. A distinction was drawn between a new claim, which is barred and not permissible and a request or prayer made by the assessee for re-computation of the deduction already claimed. Latter was permissible and not barred in terms of the decision in the case of Goetze (India) Ltd;
++ the Bench does not think Sub-section 5 to Section 80A would be attracted and should be applied in this case. Revised computation made by the assessee had resulted in disallowance of more than Rs.2.14 crores, which could have been made by the Assessing Officer while computing the claim for deduction under Section 10A of the Act. Nevertheless, the enhanced income would not have been taxable. The assessing officer had also accepted that Rs.6,13,047/- i.e. the provision for leave encashment claimed on payment basis should be allowed. He however, did not allow the other suo motu allowances made by the assessee. Disallowances and allowances in the revised computation were made in relation to bonus with reference to provision of Section 43B of the Act. Further, allowance of Rs.25,83,809/- was on account of disallowance made in the previous year which had to be allowed as expenditure in the present year in view of Section 40 (a) (i) of the Act;
++ sub-section 5 to Section 80A states that if assessee has failed to make its claim on return under 10AA or 10B or any other provisions of Chapter VIA, no deduction shall be allowed to him thereunder. In this case the assessee had claimed deduction under Section 10A of the Act in the return of income filed within the limitation period. It was, therefore, not a new claim;
Whether the rigour of sub-Section 5 of Sec 80A to prevent 'multiple claims of deduction' also extends to correction of a claim made under a particular Section - NO: HC
++ reference to the expression 'multiple claims of deduction' would be with reference to the stipulation that deduction should be claimed under a particular provision and it cannot be shifted and treated as deduction claimed under the other provision. Language of Sub-section 5 to Section 80 A does not state that the deduction once claimed under a particular section cannot be corrected and modified before the Assessing Officer. Indeed, the Assessing Officer can examine the claim for deduction and can make adjustment/ disallowance. We would not read in the amended provision, a stipulation barring and restricting the assessee from revising the computation/ claim for deduction made in accordance with Section 80A (5) of the Act.
Revenue's appeal dismissed
2019-TIOL-169-HC-DEL-IT + Case Story
PR CIT Vs GEETANJALI CREDITS AND CAPITAL LTD: DELHI HIGH COURT (Dated: January 15, 2019)
Income Tax - Sections 68, 132, 147, 148 & 158BC
Keywords - Protective additions - Reason to believe - Right of cross examination - 'somersault' - Substantive additions
THE assessee, a public limited company, made public issue of Rs 95 lakhs during the relevant AY, which was fully subscribed. The issue was made to fund the manufacture & sale of egg trays. Though the assessee acquired land for growing crops, the attempt was abandoned due to lack of resources and the land could not be put to further use. In returns for the relevant AY, the assessee declared income of Rs 6889/- and a loss of Rs 41766/- for the next AY. Thereafter, Search & Seizure operations were carried out u/s 132 at the premises of an entity, on account of which it emerged that the assessee invested about Rs 2.50 crores with a firm engaged as a liquor contractor. It was also noted that such amount paid was not refunded or repaid till the date of the Search proceedings. Inquiry revealed that this cash was first deposited in accounts of stock brokers, before being transferred to the assessee's bank account. The source of deposits in the brokers' bank accounts was unexplained. Thus the AO recorded reasons to believe and proceeded to re-open the assessment for the relevant AYs. For one AY, the AO then made additions of about Rs 2.10 crores on account of unexplained cash deposits, as well as additions of Rs 40 lakhs for the following AY. In arriving at such findings, the AO relied on statements taken from the directors in the assessee-company, as well as those taken from some of the stock brokers, which the AO claimed to have confirmed the bogus nature of the transactions.
On appeal, the CIT(A) partly sustained the findings of the AO, having reduced the quantum of the additions made for one of the two relevant AYs. On further appeal, the Tribunal held that the re-assessment proceedings were not in accordance with law, given the factual circumstances. Hence it deleted the additions made for both the AYs.
On appeal, the High Court held that,
Whether the issue of accommodation entry can be concluded not based on facts but on the basis of statement made by a third party - NO: HC
++ the order passed by the Tribunal does not dispute the evidence and material, albeit holds that this material was not tangible for the fact that three brokers did exist and it was known that the source of deposit in the bank account was a sale of shares/investments. No information was received by the AO from the Investigation Wing that the assessee had received accommodation entry. This rationale is incorrect, for whether or not any accommodation entry was received has to be inferred and concluded from the facts by the AO, and not by a third person. It is the subjective opinion formed by the AO which has to be tested on the principle of an honest and reasonable person. In this case, the stock-brokers had elucidated on the sham and bogus nature of the share transaction i.e., investment and sale of worthless shares which was done through unknown persons who were the assessee's representatives and other facts accepted and admitted in the statements which were recorded by the Investigation Wing;
Whether, in the case of re-assessment, the 'reason to believe' recorded by the AO pales against an appellate order making substantive addition - NO: HC
++ similarly, paragraph 25(ii) of the Tribunal's order proceeds on wrong premise that when the block assessment order in the case of Ms Mohinder Kaur was quashed on the technical ground that addition of Rs 2.5 crores could not have been made in the block assessment proceedings, re-opening under Section 147 read with Section 148 of the Act would not be justified. The entire money of Taranjit Singh was routed through the assessee or the Revenue could not take a 'somersault' for the purpose of re-opening assessment or make addition on substantive basis later on. This reasoning is wrong and fallacious being contrary to law, for appellate orders in the case of Ms Mohinder Kaur had not been passed when the 'reason to believe' in the case of assessee were recorded. The 'reason to believe' recorded cannot be set aside on the basis of the appellate order in the case assessee making substantive addition instead of protective additions made in the assessment order. Question of 'somersault' does not arise when protective addition is made into substantive addition;
++ the Tribunal has not taken notice of the statements of Mr Bharat Bhushan Goyal, and the three brokers, reproduced in the Assessment Orders, on the ground that there was violation of principles of natural justice. The reason given was that the Assessment Orders do not record that the assessee had been allowed to cross examine the brokers at the assessment stage. An adverse presumption has been drawn to affirmatively believe and hold that the assessee was not given opportunity to cross examine or was denied the right to cross examine because the Assessment Order did not record that such opportunity was granted. The presumption is wrong and perverse;
++ the assessee had not raised a specific ground that they were not furnished statements on oath or were denied opportunity to cross-examine the brokers. The Assessment Order specifically refers to the failure of the stock brokers to produce relevant documents/papers. The AO had not only relied upon the statements recorded by Deputy Director (Inv.) but had also himself recorded the statement of Mr Shagun Garg on 11th March, 2005. The Commissioner of Income Tax (Appeals) had similarly recorded the statement of Mr Hari Krishan Punni on 27th February, 2008 during the pendency of the appeal. Relevant facts noticed in the assessment order and statement of oath have been passed over and overlooked. Hence the question of law No. (2) relating to Assessment Year 1999-2000 in favour of the Revenue and against the assessee, albeit, with an order of remand to the Tribunal to decide the issues raised on merits after duly taking into account all facts and circumstances recorded by the AO and the first Appellate Authority.
Revenue's appeals allowed
2019-TIOL-168-HC-KAR-IT
KHODAY INDIA LTD Vs ITO: KARNATAKA HIGH COURT (Dated: January 10, 2019)
Income Tax -Writ - Sections 143(3) & 154
Keywords- Interim protection- Expeditious disposal of appeal
THE assessee company's assessment was carried out u/s 143(3) & consequently, an order of demand was issued by the Principal Commissioner of Income Tax. Subsequently, the assessee was directed to pay 10% of the disputed demand in three installments pending the disposal of appeal, by the Commissioner of Income Tax. However, it was the case of the assessee that during the pendency of the appeal, it cannot pay the amount demanded by the Revenue because of financial constraints. Hence, it pleaded for some interim protection & sought direction to be made to the Appellate Authority to expeditiously dispose of the case, before the HC.
In writ, the HC held that,
Whether assessee can be provided interim relief by way of directions to the appellate authority to expeditiously dispose of the appeal along with orders to assessee to deposit part amount demanded by Revenue - YES: HC
++ Having heard the counsel appearing for the parties and in view of the order passed by the Co-ordinate Bench in the very same Assessee's case, this Court was of the considered opinion that justice would be sub-served in directing the petitioner company to deposit Rs.8,00,000/- (Rupees Eight Lakhs only) in addition to the amount already deposited if any, on or before 21.01.2019 with liberty to move before the concerned First Appellate Authority for early disposal of the appeal, subject to the aforesaid deposit. CIT (Appeals) may consider the request of the Assessee-company to dispose of the appeal expeditiously.
Assessee's writ petition allowed
2019-TIOL-167-HC-MUM-WT
PR CWT Vs HEMANT VITTHAL WAJE: BOMBAY HIGH COURT (Dated: January 14, 2019)
Wealth Tax Act - Concealment of wealth- Registered Valuer- Penalty
THE assessee individual filed his wealth tax return wherein he declared the value of an immovable property based on the estimate of the Valuer. However, the Wealth Tax officer, challenged the valuation of the property along with the valuation of other common building of assessee. So aggrieved, the assessee appealed to the Commissioner of Wealth Tax (Appeals), who reduced the rate accepted by the WTO, and applied the rate at Rs. 5,500 per sq m. on the basis of rate at which similar property were sold around the same time. Still aggrieved, the assessee appealed to the Tribunal, which too did not find substance in assessee's assertion. Thus, the WTO imposed penalty on the additional valuation. Again, the assessee approached the Commissioner( Appeals) who provided partial relief to the assessee. However, the Tribunal deleted the entire penalty. Hence, the Commissioner approached the HC.
On hearing the appeal, the HC held that,
Whether penalty can be levied merely because the WTO does not agree with the valuation adopted by assessee on the basis of registered Valuer's report without any proof of concealment of Wealth - NO: HC
++ Having heard the learned counsel for the Tribunal and having perused the documents on record, the HC noticed that the assessee had declared the two immovable properties in the wealth tax return and had also offered valuation of such properties. This was based on the valuation report of the registered Valuer estimating the value of the property as on 1st April, 1981. The Wealth Tax Officer did not accept this valuation which was partially sustained in appeal. The Commissioner adopted the standards of the sale of the property in the near vicinity at the same time. It was under such circumstances that the Tribunal did not think it fit to confirm the penalty. The HC was broadly in agreement in view of the Tribunal. The Tribunal had referred to and relied upon three decisions of the High Courts to which the HC may refer presently.
++ In case of CWT Vs. V. Vatsala, division bench of Madras High Court noted that the assessee had filed the return of income for the wealth tax declaring the value of the property based on earlier assessments. There was subsequent agreement to sell the property at higher value despite which the High Court held that the assessee could not be deemed to have furnished inaccurate particulars.
++ In case of CWT Vs. Sanghi Bros.(India) Ltd. division bench of Madhya Pradesh High Court noted that the assessee had disclosed a certain property in return and valued it according to its own method. The addition was made on account of difference between valuation of the assessee and of that by the revenue. Under such circumstances, the Court was of the opinion that there was no concealment of wealth and therefore, penalty could not have been imposed.
++ In case of Shakuntala Khosla Vs. CWT & anr the Single Judge of Pubjab and Haryana High Court considered a situation where the assessee had declared the value of the property on the basis of certificate of the Government Approved Valuer in the earlier years. The Wealth Tax Officer did not accept such valuation and made modification. The Court held that this was not the case of concealment of wealth and the penalty therefore, cannot be imposed.
Revenue's appeal dismissed
2019-TIOL-166-HC-MUM-IT
PR CIT Vs MAMTA PAREKH: BOMBAY HIGH COURT (Dated: January 14, 2019)
Income Tax Act
Keywords- Agricultural land- Fruit bearing tress- Irrigation facilities- Revenue record
THE assessee individual filed her return. However, as the return did not mention receipt of amount on sale of land, she filed another revised return which captured the same as capital gain. Later on, she claimed that the land was an agricultural land & hence not liable for capital gain tax. Accepting this claim, the CIT(A) observed that the land comprised of mango trees, coconut trees, chikoo trees & tubewells & was an agricultural land as per the Revenue record. So aggrieved, the Revenue appealed to the Tribunal, which dismissed the appeal. Then, the Revenue approached the HC.
On hearing the appeal, the HC held that,
Whether a land comprising of fruit bearing tress & irrigation facilities can be considered to be an agricultural land when Revenue records also show it as agricultural land - YES: HC
++ Having heard the Counsel for the parties and having perused the documents on record, the HC found that the Tribunal came to the conclusion that the land in question was agricultural land. Importantly, it was shown as agricultural land in the revenue record and revenue was collected on such basis. There were fruits bearing trees on the land. There was irrigation facility available in the form of tubewells. The Division Bench of this Court in CIT v/s. Minguel Chandra Pais & Another had occasion to consider a question as to when a certain land can be categorized as agricultural land. Referring to the decision of the Supreme Court in the case of Sarifa bubi M. Ibrahim v/s. CIT, certain tests were laid down. The facts of the present case would also fall within such tests. No question of law arises.
Revenue's appeal dismissed
2019-TIOL-165-HC-MUM-IT
PR CIT Vs PAT COMMODITY SERVICES PVT LTD: BOMBAY HIGH COURT (Dated: January 15, 2019)
Income Tax Act
Keywords- Circular trading- Client code modification- Doubtful transactions
THE assessee, a private limited company engaged in providing commodity services filed its return, wherein there were some instances of client code modification. The AO made additions to its income on the ground that client modification was done to indulge in circular trading to pass on profits or losses to the clients as per requirements. However, the Tribunal rejected the Revenue's claim. So, the Revenue approached the HC.
On hearing the appeal, the HC held that,
Whether the AO can make addition only upto the limit of income that escaped assessment & not the entire amount of doubtful transaction - YES: HC
++ The Revenue normally points out number of such instances of client code modifications as well as nature of errors in filling of the client code. At any rate, what can be taxed in the hands of the present assessee was the income escaping assessment. Even if the Revenue's theory of the assessee having enabled the clients to claim contrived losses, the Revenue had to bring on record some evidence of the income earned by the assessee in the process, be it in the nature of commission or otherwise. In the present case, the Assessing Officer had added the entire amount of doubtful transactions by way of assessee's additional income, which was wholly impermissible. The HC did not know the fate of the individual investors in whose cases, the Revenue could have questioned the artificial losses. Be that as it may, the HC did not think entertaining these appeals would serve any useful purpose.
Revenue's appeal dismissed
2019-TIOL-164-HC-KAR-IT
PR CIT Vs CHAMUNDESWARI: KARNATAKA HIGH COURT (Dated: January 2, 2019)
Income Tax - Sections 143(3), 153C & 263
Keywords- Business income-Revenue Audit Party- STCG
THE assessee individual, an employee with Syndicate Bank filed his return u/s 153-C. He had purchased a land on which he constructed 12 apartments. He sold 8 of them & retained 4. He claimed the profits from sale of apartment as STCG & sale of land as LTCG. However, it was observed by the Revenue Audit Party(RAP) that income from construction business was wrongly treated as capital gains instead of business income. Thus, an order was passed to place the amount of Rs 78 lakhs (approx) under the head of business income u/s 143(3) read with Sec 263 by the assessing authority. So aggrieved, the assessee appealed to the Tribunal , which allowed it. Resultantly, the Revenue approached the HC.
On hearing the appeal, the HC held that,
Whether income from sale of property is to be considered as business income only when there is substantial proof that it was purchased for the sole purpose of reselling at profit without any intention of holding it - YES: HC
++ On considering the reasons assigned by the Tribunal, there is no substantial question of law that arises for consideration in this appeal. The reasoning of the Tribunal is based on the judgment of the Supreme Court. Even on facts, there was no material on record for the Commissioner of Income Tax (Appeals) to hold that the assessee had purchased the property with an intention of reselling the same for profit. There is no material on record to trigger such a contention. Hence, there is no substantial question of law that arise for consideration in this appeal. The HC is of the considered view that there is no merit in this appeal.
Revenue's appeal dismissed
