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23.11.2015 - Voice of CA presents - Updates
Monday, November 23, 2015

I. Headlines Today:    

  1. Govt issues draft Rules to replace Trademarks Rules, 2002; Objections/suggestions to the Rules shall be sent to Additional Secretary to the Govt of India, Ministry of Commerce & Industry, Department of Industrial Policy and Promotion  (Click for detail)
  2. Govt to simplify I-T return forms  (Click for detail)
  3. Tax-saving strategies for latecomers  (Click for detail)
  4. Norms to curb tax evasion by Indian multinationals soon  (Click for detail)
  5. Winter session unlikely to see GST breakthrough  (Click for detail)

II.  Direct Taxes Case Laws: 

1.  Pr. Commissioner of Income Tax Vs. JKD Capital & Finlease Ltd., I.T.A. No. 780/2015,  Date of Order: 13.10.2015,  High Court of Delhi

Whether limitation u/s 275 are applicable to imposition of penalty u/s 271E of the Income Tax Act, 1961

Held Yes

AO recommended the initiation of penalty proceedings the AO appeared to be conscious of the fact that he did not have the power to issue notice as far as the penalty proceedings under Section 271-E was concerned. He, therefore, referred the matter concerning penalty proceedings under Section 271-E to the Additional CIT. For some reason, the Additional CIT did not issue a show cause notice to the Assessee under Section 271-E (1) till 20th March 2012, whereas corresponding assement order was passed on 28th December 2007. There is no explanation whatsoever for the delay of nearly five years after the assessment order in the Additional CIT issuing notice under Section 271-E of the Act. The Additional CIT ought to have been conscious of the limitation under Section 275 (1) (c), i.e., that no order of penalty could have been passed under Section 271-E after the expiry of the financial year in which the quantum proceedings were completed or beyond six months after the month in which they were initiated, whichever was later. In a case where the proceedings stood initiated with the order passed by the AO, by delaying the issuance of the notice under Section 271-E beyond 30th June 2008, the Additional CIT defeated the very object of Section 275 (1) (c). 

(Please click here for judgment)


2.  Commissioner of Income Tax Vs. M/s. Indo Arab Air Services, I.T.A. No. 292/2015, Date of Order: 20.10.2015, High Court of Delhi

Whether the AO was correct in initiating reassessment proceedings u/s 148 of the Income Tax Act, without correlating the information received from Enforcement Directorate with the returns filed for period under consideration.

Held No.

The AO set out the information received from the ED, he failed to examine if that information provided the vital link to form the 'reason to believe' that income of the Assessee had escaped assessment for the AY in question. While the AO has referred to the fact that the ED gave information regarding cash deposits being found in the books of the Assessee, the AO did not state that he examined the returns filed by the Assessee for the said AY and detected that the said cash deposits were not reflected in the returns. In fact, the AO contradicted himself in the reasons recorded by him by noticing the information of the ED to the above effect and then stating that on perusal of the records for the AY in question it was noticed that the Assessee “had not disclosed these transactions in its books of accounts.” Further the AO refers to the ED’s information that Mr. Chetan Gupta, partner of the Assessee, failed to explain the sources of the cash deposits as shown in the books of accounts. However, that by itself could not have led the AO to even prima facie conclude that income of the Assessee had escaped assessment.

The explanation or the lack of it of the entries in the books of accounts may have certain relevance as far as ED is concerned but that by itself does not provide the vital link for concluding that for the purposes of the Act any part of cash deposits constituted income that had escaped assessment. There is a long distance to travel between a suspicion that income had escaped assessment and forming reasons to believe that income had escaped assessment. While the law does not require the AO to form a definite opinion by conducting any detailed investigation regarding the escapement of income from assessment, it certainly does require him to form a prima facie opinion based on tangible material which provides the nexus or the link to having reason to believe that income has escaped assessment.

(Please click here for judgment)  

III.  Reported Cases:

Direct Taxes Segment:

1.  Amendment to section 68 by insertion of proviso vide Finance Act, 2012 which casts onus on closely held company to explain source of share capital is clarificatory and, hence, applicable with retrospective effect. 
2.  Where assessee-institute having received loan from group companies, converted same into corpus donation, since lender companies were not doing any business and thus were not in a position to give huge amount of loan, addition made by Assessing Officer regarding loan amount as well as penalty order passed on basis of same was to be upheld.
(Please click here for detail)


 Golden Rules:

  "It is impossible to fail completely and
it is impossible to succeed perfectly.
But it is always possible to perform dedicatedly"



  Thanks & Regards


Voice of CA

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