1.  Oracle India Pvt. Ltd. Vs. DCIT, W.P. No. 13896/2009, Date of Order: 25.09.2014, Delhi High Court

Where assessee disclosed all the material facts about royalty payment during original assessment proceeding, AO cannot issue re-assessment notice u/s 148 of the Act to find the nature of royalty.

Assessee, a company filed its return of income for A.Y. 2002-03. The assessment u/s 143(3) of the Act was completed and assessment order was passed. Later on AO noticed that assessee acquired intangible asset by paying royalty and claimed same as revenue expenditure. AO issued notice u/s 148 of the Act after four years from the end of the relevant assessment year on the basis that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment and disallow the same moreover allowed deprecation on intangible asset.     In respond to above assessee submit that a question related to royalty was asked to him during original assessment and all material facts about royalty was disclosed by him.

Hon’ble High Court held that the entire payment by way of royalty was in the nature of revenue expenditure and this aspect had been examined and accepted by the Assessing Officer in the original assessment. There is no material which has been pointed out on behalf of the revenue which subsequently came to the knowledge of the revenue which was not already there in the original assessment proceedings. Insofar as the assessee is concerned, it had disclosed all the material facts and, therefore, there is no question of the move to re-open assessment being valid.
In the result, the appeal filed by the assessee is allowed.

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2.  Kamal Kant Jain Vs. C.I.T., I.T.A. No. 369 of 2013, Date of Order: 14.07.2014, High Court of P&H

Can AO initiate penalty proceeding u/s 271(1)(c) of the Act where assessee failed to prove genuineness of gift?

Held_Yes

Assessee is engaged in the business as partner of M/s Nikka Mal Babbu Ram & Sons, Chandigarh. The search and seizure operation was conducted at the residential and business premises of M/s NikkaMal Babbu Ram & Sons. Assessee filed return for the assessment year 2003-04. AO notice that assessee received gifts through bank channel and asked to prove genuineness of same. In reply assessee submitted that the amount of gift received was shown in the books of account and same received through banking channel and the affidavit of the donor had also been produced. AO did not appreciate the submission of assessee and treated the said gifts as income from other sources for the reason that assessee did not produce the addresses of donees, this clearly shows that the gifts are bogus and initiate penalty proceeding.

Hon’ble High Court held that the assessee had concealed the furnishing of current particulars of income and did not prove that gifts are genuine. Therefore, the explanation given by the assessee is totally false and accordingly explanation (1) to Section 271(1)(c) would not be attracted. In our opinion, this is a fit case for levy of penalty and we uphold the order of the ld. CIT(A).”

(Please click here for judgment)