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II. Direct Taxes Case Laws:
1. DCIT Vs. M/s. Raghuvir Synthetics Ltd., Civil Appeal No. 2315/2007, Date of Judgement: 28.03.2017, Supreme Court of India
Issue:
When there was a controversy amongst the High Courts on the
opinion, then the judgement of the jurisdictional High Court is binding
on the assessee and any view contrary thereto is a "prima facie" mistake
that can be made as adjustment under Section 143(1)(a) of the Income
Tax Act, 1961?
Held: Yes
Brief facts:
The respondent-assessee is a public limited company and for the
assessment year 1994-95, it had filed its return wherein it had claimed
revenue expenditure of Rs.65,47,448/- on advertisement and public issue.
However, in the Return of Income, the Company made a claim that if the
aforesaid claim cannot be considered as a revenue expenditure then
alternatively then the said expenditure may be allowed under Section 35D
of the Act by way of capitalizing in the plant and machinery obtained.
The Assessing Officer issued an intimation under Section 143(1)(a) of
the Act on 23.02.1995 disallowing a sum of Rs.58,92,700/- out of the
preliminary expenditure incurred on public issue. He, however, allowed
1/10th of the total expenses and raised demand on the balance amount.
The
intimation was challenged before the First Appellate Authority which
vide order dated 01.10.1996, allowed the appeal by holding that the
concept of 'prima facie adjustment' under Section 143(1)(a) of the Act
cannot be invoked as there could be more than one opinion on whether
public issue expenses were covered by Section 35D or Section 37 of the
Act.The matter thereafter came up in appeal before the ITAT which too
met with the same fate. In further appeal to the Hon’ble High Court u/s
260A of the Act, the outcome remained unchanged as the Hon’ble High
Court of Gujarat dismissed the appeal on the ground that a debatable
issue cannot be disallowed while processing return of income under
Section 143(1)(a) of the Act and accordingly, the department preferred
further appeal before the Hon’ble Supreme Court.
Held:
The Hon’ble Apex Court held that Even though there was a controversy
amongst the High Courts on whether expenditure for raising capital is
capital or revenue in nature, the judgement of the jurisdictional High
Court is binding on the assessee and any view contrary thereto is a
"prima facie" mistake that requires adjustment. Further, as the Hon’ble
Gujarat High Court in the case of Ahmedabad Mfg. & Calico (P) Ltd.
had taken a view that it is capital expenditure which was subsequently
followed by Alembic Glass Industries Ltd. V. CIT and the registered
office of the respondent assessee being in the State of Gujarat, the law
laid down by the Gujarat High Court was binding. Therefore, so far as
the present case is concerned, it cannot be said that the issue was a
debatable one. Hence, the ITAT and also the order of the Hon’ble Gujarat
High Court was set aside as they wrongly held that the issue was
debatable and could not be considered in the proceedings under section
143 (1) of the Act.
Therefore, the appeal of the revenue was allowed.
(Please click here for judgment)
2. Siddhi Home Makers Vs. ITO, I.T.A. No. 4168/Mum/2013, Date of Judgement: 28.04.2017, ITAT - Mumbai
Issue:
Where Assessing Officer issued two notices for imposition of penalty
namely, one u/s 274 r.w.s. 271(1)(c) of the Income Tax Act and second
u/s 274 r.w.s 271AAA of the Act in cases where search u/s 132 of the Act
has been initiated, then whether notices issued by AO are untenable in
law?
Held: Yes
Brief facts:
The assessee is a partnership firm engaged in the business of Builder
and Developer and civil construction. A search u/s 132 of the Act was
carried out at various premises of Siddhi Group on 19/02/2009, to which
the assessee also belongs. The AO finalized the assessment u/s 143(3)
r.w.s. 153A of the Act on 30/12/2010 assessing the total income at
Rs.3,05,87,120/-, thereby making an addition Rs.50,74,500/- to the
income returned in response to notice u/s 153A of the Act. After that,
for levying of penalty, the AO has issued two notices u/s 274 of the Act
on 30/12/2010; one u/s 274 r.w.s. 271(1)(c) of the Act and second u/s
274 of the Act r.w.s. 271AAA of the Act. Subsequently, vide order dated
29/06/2011 passed u/s 271(1)(c) of the Act the AO held the assessee
guilty of concealment of income and levy penalty equivalent to 100% of
the tax sought to be evaded on the income. The Assessing Officer also
observed that the case of the assessee for levy of penalty was also
covered by Explanation-5A to section 271(1)(c) of the Act. The said levy
of penalty has since been affirmed by the CIT(A). Being aggrieved by
that assessee filed further appeal before Hon’ble ITAT.
Held:
The Hon’ble ITAT held that the Assessing Officer was quite unsure as
to which of the two sections namely, section 271(1)(c) of the Act or
section 271AAA of the Act was he intending to proceed. Such an approach
is also reflective of non-application of mind by the Assessing Officer,
and, therefore, following the parity of reasoning laid down by the
Hon’ble Supreme Court in the case Dilip N. Shroff vs. JCIT, 291 ITR
519(SC), Hon'ble Bombay High Court in the case Shri Samson Perinchery as
well as the Hon'ble Karnataka High Court in the case of Manjunatha
Cotton & Ginning Factory, the notice issued by the Assessing Officer
under section 274 r.w.s. 271(1)(c) of the Act dated 30/12/2010 is
untenable and consequently, the penalty imposed by the Assessing Officer
u/s 271(1)(c) of the Act is hereby directed to be deleted.
Therefore, the appeal of the assessee is allowed.
(Please click here for judgment)
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