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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
Issue
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.
Held
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
Issue
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.
Held
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)
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