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31.03.2016 - Voice of CA presents - Updates
Thursday, March 31, 2016

I. Headlines Today    

  1. Tax dept to send notices to 5.8 mn individuals  (Click for detail)
  2. MCA notifies CARO, 2016  (Click for detail)
  3. MCA notifies Companies (Accounting Standards) Amendment Rules,2016  (Click for detail)
  4. MCA Order: Companies (Removal of Difficulties) First Order, 2016  (Click for detail)
  5. MCA Order: Companies (Removal of Difficulties) Second Order, 2016  (Click for detail)
  6. CBEC Notification: Point of Taxation (Second Amendment) Rules, 2016 - Amendment in Rule 7  (Click for detail)
  7. Gujarat passes Bill to impose tax on e-commerce transactions  (Click for detail)
  8. RBI eases ECB norms for infra space  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  CIT Vs. Harjeev Aggarwal, I.T.A. No. 8/2004, Date of Judgment: 10.03.2016, High Court of Delhi

Whether the amount used by the assessee for the purchase of property paid in cash is liable to be taxed as undisclosed income as per Section 158BB of the Income Tax Act?


Brief Facts:
A search was conducted on the premises of the non-resident, Mr. Arvind Seth which led to a finding of a sale agreement of a property with Mr. Harjeev Aggarwal worth Rs. 86 Lakh out of which Rs. 74 Lakh was paid in cash and rest Rs. 12 Lakh was paid by cheque. Following that, a search was conducted on the premises of Mr. Harjeev Aggarwal. He submitted that the property was jointly purchased by Mr. Harjeev Aggarwal, Mrs. Anita Aggarwal and Harjeev Aggarwal and Sons (HUF) and out of Rs. 74 Lakh paid in cash, Rs. 12 Lakh was paid from accumulated cash and Rs. 60 Lakh from unaccounted sale of stock. Later, assessee explained that Rs. 45 lakh (out of Rs. 74 lacs) was earnest income received as advance for sale agreements. The Revenue also found a diary containing the records of unaccounted sales and purchases.

Therefore, AO made an addition of Rs. 86 Lakh in the income of the assessee on account of undisclosed income while CIT (A) upheld the addition of Rs. 74 Lakh and deleted the addition of Rs. 12 lakh as cheques were not en-cashed. Further, ITAT deleted the addition of Rs. 74 lakh also. Aggrieved by the order, the Revenue appealed in the High Court of Delhi.

The Hon’ble High Court of Delhi held that there is no explanation as why such large payments were made in cash when they are not recorded in the books of accounts. A diary found during the search proceedings also indicate Rs. 60 lakh as for unaccounted sale and purchase which is in support of the assessee earlier statement. Further assessee produced no document in support of his claim of back to back sale agreements at the material time. Also, there was no explanation as why cash was withdrawn in trances much before the payment was made to Mr. Arvind Seth. Therefore, in consideration of the facts the assessee was liable to pay tax on the undisclosed amount. The appeal of the Revenue was allowed.

(Please click here for judgment)


2.  Mahesh Chandra Chaurasia Vs. DCIT, I.T.A. No. 267/LKW/2015, Date of Order: 17.03.2016, ITAT - Lucknow

Whether the ld. AO is justified in considering the sale proceeds of shares as Income from Other Sources in case of the uncertainty about the date and rate of purchase of shares by the assessee?

Held: No

Brief facts
The assessee sold certain shares of Allahabad Bank in AY 2011-12 which were dematerialised in AY 2008-09. As per the assessee, same were purchased in AY 2003-04, however, no supportive documents were furnished for the same. The AO, doubting the date and rate of purchase of these shares, denied the exemption of Long Term Capital Gain and considered the same as Income from Other Sources.

The Hon’ble ITAT held that the AO is not justified in making addition in the AY 2011-12. The AO is at liberty to examine the evidence and source of acquisition of these shares and in case the assessee is not able to explain the source, the addition may be made in the year of purchase which may be AY 2003-04 or AY 2008-09 but no addition can be made in the year of sale of shares.

In respect of LTCG on sale of these shares, it was held that even if the date of purchase is taken as December, 2007 being the date of credit in DEMAT account of the assessee then also, the period of holding is more than 1 year and  therefore, the gain is LTCG on sale of quoted shares which is exempt. The cost of acquisition and the amount of capital gain becomes irrelevant because whatever be the gain, the entire gain will be exempt. Thus, the Hob’ble ITAT found the addition to be unjust & allowed the appeal of the assessee.

(Please click here for judgment)  

III. Useful Articles:

1.  Delhi Budget 2016 Highlights: Focus on education, infrastructure; watches, shoes become cheaper

(Please click here for detail)

2.  Scope of exempted services for reversal of Cenvat Credit under Rule 6 of the Credit Rules - Alarming Bell

(Please click here for detail)

3.  No Service tax on sharing of resources and cost/ expenses with the Group Companies

(Please click here for detail)

(Contribution by CA. Bimal Jain and contributor is available at eMail-id:


 Golden Rules:

  "Love is beautiful because it's a feeling controlled by heart.
But Friendship is very very beautiful because
it's a feeling that controls the heart"


  Thanks & Regards


Voice of CA 

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