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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)
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