TIOL Update -2017-TIOL-INSTANT-ALL-514

PIL – Irony of fate that body of persons professing to espouse the cause of accountability has itself forgotten its accountability – so-called PIL has caused more injury to cause of public than subserving it – petition is not only wholly frivolous, but contemptuous, unwarranted, aims at scandalizing the highest judicial system of the country, without any reasonable basis and filed in an irresponsible manner - Exemplary cost of Rs.25 lacs imposed: SC [para 6, 8 to 10]

Petition dismissed

2017-TIOL-2521-HC-MUM-IT

PR CIT Vs BIRLA GROUP HOLDINGS PVT LTD: BOMBAY HIGH COURT (Dated: November 6, 2017)

Income tax - dividend income - prospective application of Rule 8D

During the subject year, the assessee derived dividend income of Rs. 5,14,19,210/-. In the assessment, the AO rejected the assessee's quantification i.e., Rs.2,31,42,534/- and applied the provisions of Rule 8D and quantified the disallowance at Rs. 5,15,25,491/-. On appeal, the CIT(A) deleted the addition. When the Revenue Department approached ITAT, it was held that provisions of Rule 8D are applicable only from the AY 2008-2009 and have no retrospective effect.

On appeal, the HC held that,

Whether the provisions of Rule 8D are applicable only from the AY 2008-2009 and have no retrospective effect - YES: HC

Whether the High Court is bound by the decision of the case decided by the Apex Court - YES: HC

++ the view taken by the FAA has been confirmed by the impugned judgment and order by holding that Rule 8D will apply only from the A.Y 2008-09. This reasoning recorded by the ITAT is in conformity with the decision of the Court in the case of Godrej & Boyce Manufacturing Co. Ltd. Vs DCIT - 2010-TIOL-564-HC-MUM-IT. As far as this Court is concerned, admittedly it continues to be bound by the decision in the case of Godrej & Boyce Manufacturing Co. Ltd., since the SLP preferred by the Revenue against the decision in the case of M/s. Godrej and Boyce Manufacturing Co. has been dismissed on the ground of delay. Hence no substantial question of law arises.

Revenue's appeal dismissed

2017-TIOL-2520-HC-MAD-IT

KRISHNASWAMI VIJAYAKUMAR Vs PR DIT: MADRAS HIGH COURT (Dated: November 17, 2017)

Income tax - Sections 132, 276C(1), 277

Keywords - commission agent - unaccounted income - penalty - prosecution for concealment

The Assessee, an individual, had preferred present petition challenging a show cause notice prior to initiation of prosecution proceedings u/s 276C(1), which stated that a search u/s 132 was conducted in assessee's residence, whereby unaccounted cash for a sum of Rs.4,93,84,300/- was seized. A sworn statement was also recorded from assessee wherein he admitted to have earned unaccounted income of Rs.4,93,84,300/- through various activities like mediating for contracts, working as a commission agent for various transactions with the Government for the F.Y 2016-17. It also stated that in the return filed for the A.Y 2017-18, the assessee declared NIL income. With the said details, the Principle DIT stated that the assessee willfully concealed the particulars of his income for the A.Y 2017-18. In such circumstances, the assessee was directed to show cause as to why prosecution u/s 277 and 276C(1) for concealment and filing of false statements in the return, should not be initiated against assessee.

On writ, the High Court held that,

Whether a show cause notice can be questioned in a writ petition - NO: HC

Whether there is any necessity at all to issue a show cause notice before granting an order of sanction - NO: HC

++ this Court is of the considered view that the present writ petition is premature. Firstly, the impugned proceedings is only a show cause notice and therefore, the assessee has to respond to the same and it cannot be questioned in a writ petition. The sheet anchor of the submissions of the counsel for assessee is by referring to Section 279(1). However, the Proviso u/s 279(1) enumerates officers, who may issue such directions or instructions to the authorities, who have been enumerated u/s 279(1). Therefore, to say that the Pr DIT has no jurisdiction even to issue the show cause notice is a plea, which is stated to be rejected;

++ as held by Supreme Court in the case of Velliappa Textiles Limited, there is no necessity at all to issue a show cause notice before granting an order of sanction, as it has been held to be an administrative act. Nevertheless, the Pr DIT issued the show cause notice with a view to provide an opportunity to the assessee, which he has to avail. Hence, this Court is not inclined to interfere with the impugned show cause notice. This Court holds that the Pr DIT is one of the authorities enumerated in the Proviso to Section 279(1) and therefore, has sufficient jurisdiction to issue the impugned show cause notice.

Assessee's petition dismissed