Bulltein A133 dated 11 August 2021

BULLETIN(Issue No.133)DT.10-08-2021

Compiled by Vinod Kumar Goel, Advocate

CASE LAWS

Kaur Sain Spinning & Weaving Mills Ltd. Vs. ACIT, Central Circle-II, Ludhiana [2021] 128 taxmann.com 147 (Chandigarh-Trib.)

Section 68, read with section 148, of the Income-tax Act, 1961 - Cash credit (Accommodation entity) - Assessment year 2011-12 - Assessee company, engaged in business of manufacturing of yarn and cloth, filed its return of income - Same was accepted and an assessment order was passed - Subsequently, Assessing Officer received an information from Income tax Officer (ITO) that a search action under section 132 was carried out in case of one 'VI' Group during which it was found that several companies of group were engaged in providing accommodation entries to various companies in form of share capital, share premium, bogus bills, unsecured loans etc. on commission basis and that one company RTCPL had made bogus investments of certain amount in assessee company - On basis of said information, Assessing Officer issued reopening notice against assessee and further passed reassessment order making additions under section 68 on account of amount of such bogus investment - Assessee contended that Assessing Officer had initiated reopning proceedings solely on basis of information received from ITO, thus, said assessment order passed by him was void ab initio - It was noted that it was apparent that Assessing Officer had issued notice under section 148 merely on basis of information received from department - He had not pointed out as to how investment in question was unexplained income of assessee - Whether since Assessing Officer had assumed jurisdiction under section 147 in a mechanical manner, said reopning notice as well as subsequent reassessment order passed by Assessing Officer was to be quashed - Held, yes [Para 13] [In favour of assessee]

P. Hemalatha Vs. Income Tax Officer, Ward-1, Karaikudi [2021] 128 taxmann.com 223 (Madras)

Section 147, read with sections 143 and 148, of the Income-tax Act, 1961 - Income escaping assessment - General (Objections of assessee) - Assessment year 2014-15 - Whether Assessing Officer is bound to dispose of objections raised by assessee against reasons of reopening by passing a speaking order - Held, yes - Assessee filed its return of income which was accepted and an assessment order was passed - Thereafter, Assessing Officer issued a reopening notice against assessee - Assessee submitted his objection against said reopening on ground that reasons recorded did not point any escapement of income but was only for verification of certain transactions - Instead of dealing with said objection, by passing a speaking order, Assessing Officer merely informed assessee that notice under section 148 was issued only after obtaining necessary approval from jurisdictional Joint Commissioner and, hence, reopening was in accordance with law - Whether Assessing Officer was to be directed to dispose of assessee's objections by passing a speaking order - Held, yes [Para 7] [Partly in favour of assessee]

Satish Kumar Khandelwal Vs. Income-tax Officer, Ward-2(2), Jaipur [2021] 127 taxmann.com 683 (Jaipur – Trib.)

Section 148, read with section 147, of the Income-tax Act, 1961 - Income escaping assessment - General (Recording of reasons) - Assessment year 2008-09 - Assessing Officer sought to reopen assessment in case of assessee on ground that information had been received from Director of Income-tax that assessee had sold property during relevant year which was registered for stamp duty purpose and since he had not filed his return of income, taxability of capital gain was not ascertainable - Whether since assessee was regularly filing his return and no efforts had been made to ascertain whether assessee had filed return or not, very reason for reopening assessment that assessee had not filed return of income was incorrect - Held, yes - Whether thus, Assessing Officer having reopened assessment mechanically without application of mind and jurisdiction, reopening of assessment was not valid and was to be quashed and set aside - Held, yes [Para 9] [In favour of assessee]

Gurgaon Realtech Ltd. Vs. National Faceless Assessment Centre, Delhi [2021] 127 taxmann.com 726 (Delhi)

After 1-4-2021, assessment order can only be passed in consonance with provisions of Section 144B; assessment order dated 15-4-2021 passed by revenue under section 143(3), read with Sections 143(3A) and 143(3B) relating to assessment year 2018-19 was set aside.

Carisberg India (P.) Ltd. Vs. National Faceless Assessment Centre, Delhi [2021] 127 taxmann.com 725 (Delhi)

Where assessee filed writ challenging draft assessment order dated 23-4-2021 for assessment year 2017-18, revenue was directed to treat impugned draft assessment order as show cause notice-cum-draft assessment order, passed under section 144B and grant assessee liberty to file reply/objections to said order.

DJ Surfactants Vs. National E-Assessment Centre, Income Tax Department, New Delhi [2021] 127 taxmann.com 641 (Delhi)

Where AO made addition to assessee's declared income under section 68 on account of unexplained unsecured loan, since it was found that assessee sought personal hearing before AO to establish genuineness of unsecured loan received by assessee which had not been granted by AO, assessee had been able to establish a prima facie case in its favour and thus impugned order is set aside to file of AO to consider assessee's reply.

Smart Vishwas Soceity Vs. National Faceless Assessment Centre, Delhi [2021] 128 taxmann.com 278 (Delhi)

Section 144B, read with sections 143, 156 and 270A of the Income-tax Act, 1961 - Faceless Assessment (Show cause notice) - Assessee challenged assessment order and consequential orders passed by revenue in view of fact that although assessee's declared income was varied, no show-cause notice cum draft assessment order was issued as mandated under section 144B - Revenue submitted that although no show cause notice-cum-draft assessment order was issued, several opportunities were granted by revenue to assessee to explain its case - However, this stand of revenue was contrary to statutory scheme, as engrafted in section 144B - Whether assessee was correct in submitting that provisions of section 144B had been violated - Held, yes - Whether therefore, impugned assessment order issued under section 143(3), read with sections 143(3A) and 143(3B), along with accompanying notice of demand, issued under section 156 and notice for initiation of penalty proceedings issued under section 270A were to be set aside - Held, yes [Paras 4 and 5][In favour of assessee]

Ajay Kumar Singh Gaur Vs. Income Tax Officer, Ward-2(2), Agra [2021] 127 taxmann.com 630 (Agra – Trib.)

Where commissions were paid outside India to assessees agent for procuring orders for assessee and element of payment of commission was duly reflected in bills for that purpose, modus operandi of assessee was clear that assessee was recipient of income in India after deduction of commission by buyer made outside India. Thus, no income had been received or paid inside India, which attracted deduction of TDS in India and therefore, assessee would not be liable to deduct TDS in India.

Uttarakhand Purv Sainik Kalyan Nigam Ltd. Vs. Income Tax Officer, Ward-2(5), Dehradun [2021] 127 taxmann.com 647 (Dehradun – Trib.)

Where the issue of exemption u/s 10(26BBB) has been extensively dealt with and the assessment was ultimately completed after making proportionate disallowance of claim of exemption and there is nothing to show that there was any failure in terms of first proviso to section 147 and there was no whisper of any fresh tangible material, entire re-assessment proceedings initiated by AO is based on existing material which was already part of record and thus action u/s 147 was solely for the purpose of enhancing the disallowance of claim of exemption u/s 10(26BBB) already made in the original assessment u/s 143(3) which is impermissible and not in accordance with spirit of section 147.

B.L. Gupta Construction (P.) Ltd. Vs. National E-Assessment Centre [2021] 127 taxmann.com 131 (Delhi)

Section 144B of the Income-Tax Act, 1961 - Faceless Assessment (Stay of demand) - Show cause notice (SCN) dated 18-3-2021 was served on assessee calling upon assessee to respond to draft assessment order - Assessee-company challenged assessment order passed by National E-Assessment Centre on ground that before expiry of time granted in SCN i.e. 26-3-2021, final assessment order dated 25-3-2021 had been passed and notice of demand under section 156 had also been issued - On same day, notice for imposition of penalty was also issued - Assessee further submitted that although, a reply to SCN was prepared by assessee it could not be filed as assessment order was already passed on 25-3-2021 - Prima facie, submission that there had been a breach of principles of natural justice, appeared to be correct - Whether notice was to be issued to revenue and interim stay on notice of demand was to be granted - Held, yes [paras 4, 4.1 and 9] [In favour of assessee]

Balraj Hire Purchase (P.) Ltd. Vs. National Faceless Assessment Centre [2021] 128 taxmann.com 190 (Delhi)

Assessee has a statutory right to personal hearing under section 144B(7)(vii); Where there was a substantial variation made by AO in taxable income of assessee, assessee ought to have been granted a personal hearing in matter, failure to grant a personal hearing had vitiated impugned assessment order and thus, impugned assessment order was to be set aside.

Central Board of Direct Taxes Vs. Vasudev Adigas Fast Food (P.) Ltd. [2021] 128 taxmann.com 287 (Karnataka)

Assessee company filed its return of income after a delay - It sought for condonation of delay on ground that internal disputes and prolonged litigation between promoters and investors concerning very management of assessee had led to delay in statutory audits and other compliances, which was beyond control of assessee - CBDT rejected said application for condonation of delay on ground that delay was not caused by any external factors which assessee had no control over - On writ, Single Judge quashed said order and allowed application for condonation of delay - Revenue filed an instant writ petition - It was noted that CBDT had not appreciated reasons given by assessee for delay in filing return of income nor had taken into consideration documents produced by assessee before rejecting its application seeking condonation of delay and that such delay was beyond control of assessee - Whether there was no reason to interfere with order of Single Judge and same was to be upheld - Held, yes.

Daya Nand Pushpa Devi Charitable Trust Vs. Additional Commissioner of Income Tax [2021] 128 taxmann.com 118 (Allahabad)

Where assessee trust was running a dental college and was also running and managing hostel for residence of students admitted in said college, since, activity of running hostel was not a separate business activity, surplus income from hostel fee could not be treated as profit and gains of a separate business or commercial activity of trust, hence, exemption under section 11(1) could not have been disallowed to assessee.

Smt. Uma Agarwal Vs. ITO -1(3), Gwalior M.P. ITA No. 35/Agr/2021  (Agra Bench)

In our opinion assessee had duly explained the source of deposit i.e previous years saving and we have no hesitation to accept the same , as it would been presumed that this small amount of Rs 2,21, 000/ would have been accumulated or saved by her from various activities undertaken by her for and on behalf of family in last many years . Further as mentioned herein above, in the decision of Kirti ( supra), women per say cannot be said to be not having income from any activities , as they are presumed to always been doing economic activities in the family for many years, hence in our view the assessee had duly explained the source of her investment. Therefore no additions can be made by lower authority. Further even if we ignore the explanation, for the sake of argument, then also it is for the assessing officer to bring on record some cogent evidence to prove that the amount deposited in the bank was undisclosed income arising from the business or from any other activities. No evidence has been brought on record by the lower authorities. Hon’ble Supreme Court in the matter of Smt. P.K. Noorjahan*[1999] 103 Taxman 382 (SC) it was held as

“3. Shri Ranbir Chandra, the learned counsel appearing for the revenue, has urged that the Tribunal as well as the High Court were in error in their interpretation of section 69. The submission is that once the explanation offered by the assessee for the sources of the investments found to be non-acceptable the only course open to the ITO was to treat the value of the investments to be the income of the assessee. The submission is that the word 'may' in section 69 should be read as 'shall'. We are unable to agree. As pointed out by the Tribunal, in the corresponding clause in the Bill which was introduced in the Parliament, the word 'shall' had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word 'may'. This clearly indicates that the intention of the Parliament in enacting section 69 was to confer a discretion on the ITO in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the ITO under section 69 to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case.

4. In the instant case, the Tribunal has held that the discretion had not been properly exercised by the ITO and the AAC in taking into account the circumstances in which the assessee was placed and the Tribunal has found that the sources of investments could not be treated as income of the assessee. The High Court has agreed with the said view of the Tribunal. We also do not find any error in the said finding recorded by the Tribunal. There is, thus, no merit in these appeals and the same are, accordingly, dismissed. No order as to costs.”

The word “ may” had been used by the statute under section 69A , as had been used by the statute under section 69 of the Income Tax Act 1961, therefore applying the same analogy as laid down by SC in the case of Smt. P.K. Noorjahan(supra) , we are of the opinion that the amount deposited by the assessee during the demonetisation. Cannot be treated as income of the assessee. Hence the appeal of the assessee is allowed. We may clarify that this decision may be treated as precedent in respect to proceedings arising out of the cash deposit made by the housewives during the demonetisation scheme 2016, only up to the limit of Rs 2.5 lakhs only.

Lastly We record our appreciation for contribution made by Sh Manuj Sharma Adv in adjudication of this appeal .

In the result the appeal of the assessee is allowed.

Teleperformance Global Services (P.) Ltd. Vs. Assistant Commissioner of Income Tax, Central Circle 25(1), New Delhi [2021] 127 taxmann.com 46 (Bombay)

Section 292B, read with section 148, of the Income-tax Act, 1961 - Return of income not to be invalid on certain grounds - Assessment year 2012-13 - Whether assessment order in name of non-existing entity is a substantive illegality and would not be procedural violation of section 292B - Held, yes - Notice under section 148 for assessment year 2012-13 in name of company TSPL had been issued by Assessing Officer directing to file return of income within thirty days on ground that there was reason to believe that income chargeable to tax had escaped assessment - Petitioner, with which TSPL had been amalgamated, had filed a letter stating that TSPL had been amalgamated with effect from 1-4-2010 and since then said company had ceased to exist, and as such, there was no question of filing return of income by TSPL - However, assessment order had been passed against TSPL-Petitioner filed writ petition, challenging notice and assessment order - It was found that TSPL had been amalagamated with petitioner company and it had been submitting returns and those were assessed from time-to-time in respect of subsequent assessment years - Whether assessment order in name of non-existing entity was a substantive illegality and it would be appropriate to allow petition - Held, yes [Paras 17 to 25] [In favour of assessee]

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