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27.02.2019 - Voice of CA presents - Latest Updates
Wednesday, February 27, 2019

  I. Headlines Today:   

  1. Income tax dept to issue only e-refunds from Mar 1, 2019; bank account-PAN linking must  (Click for detail)
  2. Insolvency & Bankruptcy code: Govt. looking at ways to avoid frivolous bids  (Click for detail)
  3. Jet Airways may have evaded taxes worth Rs 650 cr: Income Tax dept  (Click for detail)
  4. Tax cuts should boost Indian realty demand, but many issues linger  (Click for detail)
  5. Does Budget 2019 make 2nd house mandatorily 'self-occupied'? Experts differ  (Click for detail)
  6. RBI proposes tightening compensation norms for private, foreign banks  (Click for detail)

  II. Direct Taxes Case Laws: 

1.  CIT (Exemptions) Vs. Jagannath Gupta Family Trust, Civil Appeal No. 1381 of 2019, Date of Pronouncement: 01.02.2019, Supreme Court of India

Whether a trust registration can be cancelled if it is found engaged in a money laundering transaction?

Answer: Yes

Brief Facts:
The assessee is a registered trust u/s 12AA of the Act. The trust was created with the object of public and charitable purposes. A survey was conducted u/s 133A of the Act,in the premises of School of Human Genetics and Population Health, Kolkata by the Investigation Wing and it was found that a donation is given to the respondent of Rs.37,00,000/-. It is the case of the appellant that the donor did not actually donate such amount and such entry was shown by receiving the amount in cash from the respondent,by retaining commission and therefore, initiated the proceedings for cancellation of registration and issued a show cause notice. The assessee replied to the same accordingly and took a defence statement that the procedure is against the principle of natural justice. And, the order is passed against the assessee on the ground that the statement of the representative of the donor was recorded and also it is found that the trust is involved in money laundering from several previous years.

Being aggrieved, the assessee filed an appeal before the Hon’ble ITAT stating that the opportunity to cross-examine the representative is not provided to the assessee. Thus, The Hon’ble Tribunal remanded the matter for fresh consideration by primary authority.

Further, not satisfied with the judgement, the assessee filed an appeal before the Hon’ble High Court and it has allowed the appeal and quashed the order of cancellation of registration. And, held that it is possible that a particular donation may be bogus or fictitious and, the assessee may be assessed to tax. But the single donation which is allegedly bogus, would not establish that the activities of the trust are not genuine and not being carried out in accordance with the objects of the trust. Further, being aggrieved the revenue authority file an appeal before the Hon’ble Supreme Court.

Held, that the reason assigned by the High Court is erroneous and runs contrary to the plain language of Section 12AA(3) of the Act. In view of the serious allegations made against the respondent trust, it is a matter for consideration of the issue, after giving opportunity as pleaded by the respondent, but the High Court has committed error in entertaining the authority, and in quashing the order of cancellation of registration. However,it is made clear that we have not expressed any opinion on merits, and it is open to the CIT (Exemptions)to consider all the issues on its own merit, uninfluenced by the observations made by the appellate authority, the High Court or in this order by this Court. Hence, the appeal is allowed.
The appeal is in favour of revenue and against the assessee.

(Please click here for judgment)

2.  Nitin Agarwal (HUF) Vs. ITO, I.T.A. No. 7309/Del/2018, Date of Pronouncement: 11.01.2019, ITAT - Delhi

Whether AO is justified in invoking Section 68 of the Act where no books of accounts are maintained by the assessee during the ordinary course of business?

Held: No

Brief facts:
The assessee has e-filed his return of income on 30.07.2014 declaring total income at ₹5,72,720/- which was assessed u/s 143(3) of the Act. AO observed that assessee has shown income from business, capital gain and othersources and vide Schedule EI has not disclosed any long-term capital gain.During the assessment proceedings, assessee was asked about purchase and sale of shares of M/s Kailash Auto Finance. The assessee filed a revised computation of income declared longer capital gain amounting to Rs. 20,94,300/-, which was claimed as exempt. The Ld. AO made an addition u/s 68 of the Act alleging that the generation of LT CG through the process from purchase to receipt of cheque is totally arranged and actually no capital gain arose, but assessee’s own cash has been routed through different entities and ultimately reached to his hand by cheque in the disguise of sale proceeds of listed security. The hon’ble CIT (A)dismissed the appeal of the assessee. Being aggrieved, the assessee filed an appeal before Hon’ble ITAT.

It was held that the Ld. AO has invoked the Section 68 of the Act on cash deposits found in the bank accounts. Since no books of account are maintained in the ordinary course of business of the assessee, it is held that no addition u/s 68 of the Act is tenable in law as section is applicable only where creditsare found in books of accounts maintained by assessee. Therefore, the addition should be deleted.

Hence, the appeal was held in favour of theassessee and against therevenue.

Cases cited:
Inder Singh vs. ITO, Telecommunications (2011)ITA No. 1931/Del/2016 (Delhi- ITAT)
Vijay Kumar Prop. V.K. Medical Hall vs. ITO. (2012) ITA No. 2483/Del/2015 (Delhi- ITAT)

(Please click here for judgment)


Golden Rules:

  "Memories are like the house of ants,
you do not know how many are hidden inside there.
But when one comes out, then others follow one after another" 


Thanks & Regards


Voice of CA 

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