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18.05.2018 - Voice of CA presents - Latest Updates
Tuesday, May 22, 2018

  I. Headlines Today:   

  1. IT dept cautions TDS deductors against quarterly filing default  (Click for detail)
  2. MCA issues clarification regarding applicability of CODS on struck off companies  (Click for detail)
  3. SEBI: New system for monitoring of foreign investment limit in listed Companies to be operational on June 01, 2018  (Click for detail)
  4. ICAI: Exposure Draft of Accounting Standard (AS) 109, Financial Instruments (Comments to be received by June 30, 2018)  (Click for detail)

II. A Useful Presentation:

1.  Issues on PENNY STOCK

      (Please click here)

(Contribution by CA. Sanjay K. Agarwal, Founder - Voice of CA; and contributor is available at Email-id: )

  III. Direct Taxes Case Law: 

1.  Shri Prahalad Singh Vs. ITO, I.T.A. No. 3375/DEL/2017, Date of Pronouncement: 11.05.2018, ITAT - Delhi

Whether notice issued under Sec 148 of income tax act valid if reasons to believe u/s 147 are factually incorrect and unsigned by the Ld. AO.

Held: No

Brief facts
The return of income for AY 2011-12 was file by assessee on 18.09.2012 showing total income at Rs.11,83,380. Subsequently the Ld.AO noticed that assessee has sold land at village Kadarpur Sohna on 28.09.2010 along with others for Rs.30.24CR and his share was Rs.8.43CR which was not shown in return of income as capital gain on sale of asset falling under the municipal corporation limits of Gurgaon and within the provisions of sec2(14) of the act. Accordingly, Ld.AO made addition of Rs.8.28CR. On appeal assessee  contended that notice was unsigned and challenged  the  correctness of reasons recorded which were rejected by the appellate authority.
Being aggrieved the assessee has filed an appeal before Hon’ble ITAT.

The Hon’ble ITAT relying upon judgement of Hon’ble Calcutta High Court in case of B.K. Gooyee Vs. CIT [1966] 62 ITR 109 held that signing of notice is not merely an inconsequential technicality rather a mandatory requirement which if not fulfilled renders the notice invalid. Further, the certificate of Tehsildar is a conclusive proof that land was outside municipal limits therefore reason to believe were ipse facto incorrect and reassessment proceedings are liable to be quashed.
The appeal was held in favour of the assessee and against the revenue.

Cases Referred:
B.K. Gooyee Vs. CIT [1966] [62 ITR 109], Atlas Cycle Industries Ltd Vs. CIT [180 ITR 0319] & Umashankar Mishra  [1982] [136 ITR 330]

(Please click here for judgment)

2.  Juliet Industries Ltd. Vs ITO, I.T.A. No. 5452/Mum/2016, Date of Pronouncement: 04.04.2018, ITAT - Mumbai

Whether the Ld. AO fall into interpretational error by overriding the basic condition of having a “reason to believe” for initiation of assessment or reassessment proceedings in respect of any issue that comes to the notice of AO subsequently in the course of proceedings as enumerated in explanation 3 to Section 147 of the Act.

Held: Yes

Brief facts
The assessee being resident corporate assessee was subjected to reassessment proceedings vide issuance of notice dated 14/03/2014 on receipt of information from DGIT(Inv) that the assessee has obtained bogus purchase bills of Rs.9990 to which assessee agreed for addition to avoid litigation.

On perusal of documents filed by assessee during the above proceedings Ld.AO issued notices to applicants who had introduced share capital of Rs.765lac in the assessee-company. The notices didn’t elicit satisfactory response from the applicants and based on the returned income of some applicants and factual matrix, the Ld. AO added the amount of Rs.765 lacs in the income of assessee as unexplained credit. On appeal the Ld. CIT(A) partially deleted the addition.
Being aggrieved both the revenue and assessee have filed an appeal before Hon’ble ITAT.

The Hon’ble ITAT held that Ld. AO can’t unearth completely new unconnected grounds of addition particularly when there is no tangible material available on record suggesting escapement of income at the time of initiation of reassessment proceedings.
Non-inclusion of subsequent issue (share capital in this case) in the original reasons recorded under subsection (2) of Section 148 can’t override the basic necessity of statutory provision that necessitates having a “reason to believe” for initiation of proceedings under this section.
As a general rule, explanation to a statutory provision is intended to explain its contents and shouldn’t be construed to override or render the basic substance of provision nugatory(futile).
Further, a fresh notice is required to be issued for new issues (share capital in this case) which is missing in the present case.
The appeal was held in favour of the assessee and against the revenue.

Cases Referred:
Ranbaxy Laboratories Ltd. v. CIT [2011 336 ITR 136], ACIT Vs Rajesh Jhaveri Stock Brokers Pvt. Ltd [2007 291 ITR 500], Signature Hotels Pvt. Ltd. Vs. Income Tax Officer [338 ITR 51], CIT v. Jet Airways Ltd. [2011 331 ITR 236] & CIT Vs. Sun Engg. Works P. Ltd. [198 ITR 297]

(Please click here for judgment)

Golden Rules:

  A great thinker was asked,
what is the meaning of life?
He replied, "life itself has no meaning,
life is an opportunity to create a meaning" 


Thanks & Regards


Voice of CA 

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