INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION PRINT EDITION ITR Volume 362 : Part 3 (Issue dated : 7-4-2014) SUBJECT INDEX TO CASES REPORTED IN THIS PART HIGH COURTS Appeal to Appellate Tribunal --Recovery of tax--Interim relief--Stay of demand--Order of stay must record briefly assessee’s case, look at questions involved in appeal and amount required to be deposited considering issue in appeal--Order of stay granted on ground that for major part of outstanding demand assessee has good prima facie case--Order not stating even prima facie how demand of tax is arguable on merits--Pending appeal--Assessee to deposit further 50 per cent. of demand of tax if adjournment at instance of assessee--Income-tax Act, 1961, s. 254(2A)-- Director of Income-tax (Exemption) v. Jamshetji Tata Trust (Bom) . . . 357 Business --Speculative transaction--Meaning of speculative transaction--Amount received as damages for breach of contract--Business income--Income-tax Act, 1961, ss. 28, 43(5)-- CIT v. Premier Vegetable Products Ltd. (Raj) . . . 464 Business expenditure --Disallowance--Entertainment expenditure--Expenditure on tea, coffee, etc., for customers--Finding that expenditure was for business purposes and it was very low--Expenditure deductible--Income-tax Act, 1961, s. 37-- CIT v. Premier Vegetable Products Ltd. (Raj) . . . 464 Cash credit --Firm--Partners--Capital introduced by partners--No material showing partners had no capacity to introduce such capital--Assessment orders of partners showing capital introduced by partners representing their agricultural income--Extracts of land records supporting claim--Sum did not represent income of firm--Income-tax Act, 1961, s. 68-- CIT v. Odedara Construction (Guj) . . . 338 Co-operative society --Special deduction--Assessee not a credit co-operative bank but a credit co-operative society--Exclusion clause not applicable--Assessee entitled to deduction--Income-tax Act, 1961, s. 80P(4)-- CIT v. Jafari Momin Vikas Co-op. Credit Society Ltd. (Guj) . . . 331 Collection of tax at source --Liquor business--Meaning of “buyer†in section 206C--Licensee under State Act--Not a buyer--Tax cannot be collected at source from such a licensee--Income-tax Act, 1961, s. 206C-- Sankatha Shukla v. Union of India (All) . . . 444 Exemption --Educational institution--Condition precedent for claiming exemption under section 10(23C)(vi)--Educational institution granted exemption for a long time--Cancellation of registration under section 10(23C)(vi) and denial of exemption on the ground that institution conducted examinations such management aptitude tests and screening and selection tests--No finding that assessee was carrying on activities which were not solely educational--Matter remanded--Income-tax Act, 1961, s. 10(23C)(vi)-- All India Management Association v. Director General of Income-tax (Exemptions) (Delhi) . . . 451 ----Educational institution--Meaning of education--Assessee not conducting classes but affiliating schools, prescribing syllabus and conducting examinations--Assessee is an educational institution within the meaning of section 10(23C)(vi)--Income-tax Act, 1961, s. 10(23C)(vi)-- Council for the Indian School Certificate Examinations v. Director General of Income-tax (Exemptions) (Delhi) . . . 436 Income from undisclosed sources --Manufacture and export of gold ornaments--Documents recording manufacture showing higher purity of gold than export documents--Difference substantial--Onus on assessee to reconcile difference not discharged--Explanation of assessee that actual purity of exported ornaments was higher than declared in documents--Explanation not found acceptable--Excess gold not shown to be separately or independently exported--Conclusion that gold subjected to local sales--Proper--Findings not perverse--Value of unaccounted gold added to income--Justified-- Subodhchandra and Co. v. ITO (Guj) . . . 387 Income or capital --Sale and purchase of shares--Assessee maintaining two separate portfolios--Short-term capital gains and long-term capital gains out of investment account--Not business income--Income-tax Act, 1961-- CIT v. Avinash Jain (Delhi) . . . 441 Income-tax --General principles--Principles of consistency-- Aroni Commercials Ltd. v. Deputy CIT (Bom) . . . 403 Interest on borrowed capital --Non-use of borrowed funds for business--Interest-free loans to sister concerns--No fresh borrowing in year under appeal and reduction of borrowed funds--Not to be assumed for non-business purpose--Availability of interest-free funds disallowance of interest only for the remaining sum--Income-tax Act, 1961-- CIT v. Kajal Exports (Guj) . . . 328 Penalty --Reduction or waiver of penalty--Powers of Commissioner--Scope of section 273A--Commissioner to take into account only conditions enumerated in section 273A--Commissioner cannot reject application for reduction or waiver by considering the case like an Assessing Officer--Income-tax Act, 1961, s. 273A-- Kahan Chand v. CIT (P&H) . . . 476 Precedent --Effect of decision of High Court--High Court decision binding on income-tax authorities under its jurisdiction-- Aroni Commercials Ltd. v. Deputy CIT (Bom) . . . 403 ----Effect of decision of Supreme Court in UOI v. Om Prakash S. S. and Co. [2001] 248 ITR 105 (SC)-- Sankatha Shukla v. Union of India (All) . . . 444 ----Effect of Supreme Court decision in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19-- Samsung India Electronics P. Ltd. v. Deputy CIT (Delhi) . . . 460 Reassessment --Income escaping assessment--Reason to believe--Notice--Information that after group companies were allotted unified access service licences by Department of Telecommunications, assessee obtained shares in those companies at Rs. 10 per share but simultaneously entered into agreement with third party for sale of shares at premium of Rs. 159 per share and that difference was income of assessee which had escaped assessment--New and tangible information supporting inference that sale of shares to assessee undervalued--Adequacy of reasons not to be agitated in writ petition at stage of notice--Failure to furnish copy of 2G investigation report--Not material--Income-tax Act, 1961, ss. 147, 148--Constitution of India, art. 226-- Acorus Unitech Wireless P. Ltd. v. Asst. CIT (Delhi) . . . 417 ----Notice--Condition precedent--Reason to believe income had escaped assessment--Reason must be based on tangible material--Original assessment of profits on sale of shares as capital gains--Similar assessments for prior and subsequent years--Notice on basis of audit objection to assess amount as business income--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- Aroni Commercials Ltd. v. Deputy CIT (Bom) . . . 403 ----Notice--Reason to believe--Duty of Department to communicate information or material on which Assessing Officer records satisfaction--No requirement mandating disclosure of specific document--Where information communicated in accordance with requirement assessee cannot compel disclosure of other documents--Income-tax Act, 1961, ss. 147, 148-- Acorus Unitech Wireless P. Ltd. v. Asst. CIT (Delhi) . . . 417 ----Notice--Writ petition challenging notice--Disposal by court upon undertaking by Department to withdraw notice but with liberty to initiate fresh proceedings--Clear direction of court that fresh proceedings not to be barred--Department complying with order of court--Fresh proceedings not vitiated merely because reasons for fresh proceedings drawn up before communication of withdrawal of earlier proceedings to assessee--Income-tax Act, 1961, ss. 147, 148-- Acorus Unitech Wireless P. Ltd. v. Asst. CIT (Delhi) . . . 417 ----Notice after four years on ground assessee had not reported loan received from its directors and their family members in financial statement filed with return--No sufficient explanation offered by assessee in its objection--Fresh objection before court that loan transaction was margin money reflected in balance sheet--Not permissible--Reasonable belief on part of Assessing Officer to come to a prima facie view that income chargeable to tax has escaped assessment--Income-tax Act, 1961, s. 148-- Crown Consultants P. Ltd. v. CIT (Bom) . . . 368 ----Notice after four years--Conditions precedent--Original assessment made after detailed inquiry treating profits on sale of shares as capital gains--All facts necessary for purpose of assessment before Assessing Officer--No failure by assessee to disclose fully and truly all material facts--Notice to bring profits to tax as business income not sustainable--Income-tax Act, 1961, s. 148-- Vinod Dhudalal Shah v. Asst. CIT (Guj) . . . 345 ----Notice after four years--Conditions precedent--Original assessment made in scrutiny proceedings--Assessing Officer having ample occasion to consider and detect all material disclosed by assessee during original assessment--No denial that details under section 44AB furnished along with return--No failure on part of assessee to disclose material facts necessary for assessment--Notice without jurisdiction--Income-tax Act, 1961, s. 148-- Talati and Panthaky Associated P. Ltd. v. Deputy CIT (Bom) . . . 362 ----Procedure--Notice--Assessee must file return and seek reasons for notice--Assessee can raise objections which should be considered and disposed of by a speaking order--Income-tax Act, 1961, ss. 147, 148-- Samsung India Electronics P. Ltd. v. Deputy CIT (Delhi) . . . 460 Recovery of tax --Attachment and sale of property--Transfer to defraud Revenue--Power of Tax Recovery Officer under section 281--No power to declare a transfer to be void--Only civil suit would lie--Income-tax Act, 1961, s. 281-- Karsanbhai Gandabhai Patel v. TRO (Guj) . . . 374 ----Protection against attachment--Property exempt from attachment--Public provident fund account--Amount remaining in account would be immune from attachment for recovery of tax dues--Income-tax Act, 1961, s. 226(3)-- Dineshchandra Bhailalbhai Gandhi v. TRO (Guj) . . . 380 Refund --Application for refund--Condonation of delay--Optional early retirement scheme--Exemption--Deduction of tax at source--Assessee not claiming refund--Circular clarifying that employees of Reserve Bank of India who opted for scheme will be entitled to benefit of section 10(10C)--Supreme Court also holding amounts received by retiring employees of Reserve Bank of India opting for scheme eligible for exemption under section 10(10C)--Revised return filed soon thereafter should be considered as application for condonation of delay--Refusal to condone delay and denial of refund adopting a hyper-technical view--Not proper--Income-tax Act, 1961, ss. 10(10C), 119(2)(b)-- Devdas Rama v. CIT (Bom) . . . 335 Settlement of cases --Settlement Commission--Powers--No power of rectification--Settlement Commission modifying its directions with respect to charging interest exercising powers of rectification--Not permissible--Income-tax Act, 1961, ss. 234A, 234B, 234C-- Kakadia Builders P. Ltd. v. ITO (Guj) . . . 342 Transfer of case --Assessee filing petition against transfer of case to Hyderabad but not moving court for interim relief--Seeking relief only when notices issued after transfer--Assessee guilty of laches--No occasion for court to examine petition on merits--Income-tax Act, 1961, s. 127-- Patel KNR JV v. CIT (Bom) . . . 351 Unexplained income --Assessee belonging to reputed family of jewellers of erstwhile Ruler--Ancestral ornaments passed on from generation to generation and assessee as only daughter in India, married and settled, with consent of brothers and ailing father chose to bequeath ornaments and cash--Supporting documents indicating clearly transfer from USA to India--Tribunal justified in sustaining Rs. 8 lakhs out of Rs. 18 lakhs--Income-tax Act, 1961, s. 69-- CIT v. Diptiben D. Patel (Guj) . . . 325 Wealth-tax --Penalty--Reduction or waiver of penalty--Section 18B of Wealth-tax Act similar to section 273A of Income-tax Act--Rejection of application for reduction or waiver by considering case like a Wealth-tax Officer--Order not valid--Wealth-tax Act, 1957, s. 18B--Income-tax Act, 1961, s. 273A-- Kahan Chand v. CIT (P&H) . . . 476 SECTIONWISE INDEX TO CASES REPORTED IN THIS PART Constitution of India : Art. 226 --Reassessment--Income escaping assessment--Reason to believe--Notice--Information that after group companies were allotted unified access service licences by Department of Telecommunications, assessee obtained shares in those companies at Rs. 10 per share but simultaneously entered into agreement with third party for sale of shares at premium of Rs. 159 per share and that difference was income of assessee which had escaped assessment--New and tangible information supporting inference that sale of shares to assessee undervalued--Adequacy of reasons not to be agitated in writ petition at stage of notice--Failure to furnish copy of 2G investigation report--Not material-- Acorus Unitech Wireless P. Ltd. v. Asst. CIT (Delhi) . . . 417 Income-tax Act, 1961 : S. 10(10C) --Refund--Application for refund--Condonation of delay--Optional early retirement scheme--Exemption--Deduction of tax at source--Assessee not claiming refund--Circular clarifying that employees of Reserve Bank of India who opted for scheme will be entitled to benefit of section 10(10C)--Supreme Court also holding amounts received by retiring employees of Reserve Bank of India opting for scheme eligible for exemption under section 10(10C)--Revised return filed soon thereafter should be considered as application for condonation of delay--Refusal to condone delay and denial of refund adopting a hyper-technical view--Not proper-- Devdas Rama v. CIT (Bom) . . . 335 S. 10(23C)(vi) --Exemption--Educational institution--Condition precedent for claiming exemption under section 10(23C)(vi)--Educational institution granted exemption for a long time--Cancellation of registration under section 10(23C)(vi) and denial of exemption on the ground that institution conducted examinations such management aptitude tests and screening and selection tests--No finding that assessee was carrying on activities which were not solely educational--Matter remanded-- All India Management Association v. Director General of Income-tax (Exemptions) (Delhi) . . . 451 ----Exemption--Educational institution--Meaning of education--Assessee not conducting classes but affiliating schools, prescribing syllabus and conducting examinations--Assessee is an educational institution within the meaning of section 10(23C)(vi)-- Council for the Indian School Certificate Examinations v. Director General of Income-tax (Exemptions) (Delhi) . . . 436 S. 28 --Business--Speculative transaction--Meaning of speculative transaction--Amount received as damages for breach of contract--Business income-- CIT v. Premier Vegetable Products Ltd. (Raj) . . . 464 S. 37 --Business expenditure--Disallowance--Entertainment expenditure--Expenditure on tea, coffee, etc., for customers--Finding that expenditure was for business purposes and it was very low--Expenditure deductible-- CIT v. Premier Vegetable Products Ltd. (Raj) . . . 464 S. 43(5) --Business--Speculative transaction--Meaning of speculative transaction--Amount received as damages for breach of contract--Business income-- CIT v. Premier Vegetable Products Ltd. (Raj) . . . 464 S. 68 --Cash credit--Firm--Partners--Capital introduced by partners--No material showing partners had no capacity to introduce such capital--Assessment orders of partners showing capital introduced by partners representing their agricultural income--Extracts of land records supporting claim--Sum did not represent income of firm-- CIT v. Odedara Construction (Guj) . . . 338 S. 69 --Unexplained income--Assessee belonging to reputed family of jewellers of erstwhile Ruler--Ancestral ornaments passed on from generation to generation and assessee as only daughter in India, married and settled, with consent of brothers and ailing father chose to bequeath ornaments and cash--Supporting documents indicating clearly transfer from USA to India--Tribunal justified in sustaining Rs. 8 lakhs out of Rs. 18 lakhs-- CIT v. Diptiben D. Patel (Guj) . . . 325 S. 80P(4) --Co-operative society--Special deduction--Assessee not a credit co-operative bank but a credit co-operative society--Exclusion clause not applicable--Assessee entitled to deduction-- CIT v. Jafari Momin Vikas Co-op. Credit Society Ltd. (Guj) . . . 331 S. 119(2)(b) --Refund--Application for refund--Condonation of delay--Optional early retirement scheme--Exemption--Deduction of tax at source--Assessee not claiming refund--Circular clarifying that employees of Reserve Bank of India who opted for scheme will be entitled to benefit of section 10(10C)--Supreme Court also holding amounts received by retiring employees of Reserve Bank of India opting for scheme eligible for exemption under section 10(10C)--Revised return filed soon thereafter should be considered as application for condonation of delay--Refusal to condone delay and denial of refund adopting a hyper-technical view--Not proper-- Devdas Rama v. CIT (Bom) . . . 335 S. 127 --Transfer of case--Assessee filing petition against transfer of case to Hyderabad but not moving court for interim relief--Seeking relief only when notices issued after transfer--Assessee guilty of laches--No occasion for court to examine petition on merits-- Patel KNR JV v. CIT (Bom) . . . 351 S. 147 --Reassessment--Income escaping assessment--Reason to believe--Notice--Information that after group companies were allotted unified access service licences by Department of Telecommunications, assessee obtained shares in those companies at Rs. 10 per share but simultaneously entered into agreement with third party for sale of shares at premium of Rs. 159 per share and that difference was income of assessee which had escaped assessment--New and tangible information supporting inference that sale of shares to assessee undervalued--Adequacy of reasons not to be agitated in writ petition at stage of notice--Failure to furnish copy of 2G investigation report--Not material-- Acorus Unitech Wireless P. Ltd. v. Asst. CIT (Delhi) . . . 417 ----Reassessment--Notice--Condition precedent--Reason to believe income had escaped assessment--Reason must be based on tangible material--Original assessment of profits on sale of shares as capital gains--Similar assessments for prior and subsequent years--Notice on basis of audit objection to assess amount as business income--Notice not valid-- Aroni Commercials Ltd. v. Deputy CIT (Bom) . . . 403 ----Reassessment--Notice--Reason to believe--Duty of Department to communicate information or material on which Assessing Officer records satisfaction--No requirement mandating disclosure of specific document--Where information communicated in accordance with requirement assessee cannot compel disclosure of other documents-- Acorus Unitech Wireless P. Ltd. v. Asst. CIT (Delhi) . . . 417 ----Reassessment--Notice--Writ petition challenging notice--Disposal by court upon undertaking by Department to withdraw notice but with liberty to initiate fresh proceedings--Clear direction of court that fresh proceedings not to be barred--Department complying with order of court--Fresh proceedings not vitiated merely because reasons for fresh proceedings drawn up before communication of withdrawal of earlier proceedings to assessee-- Acorus Unitech Wireless P. Ltd. v. Asst. CIT (Delhi) . . . 417 ----Reassessment--Procedure--Notice--Assessee must file return and seek reasons for notice--Assessee can raise objections which should be considered and disposed of by a speaking order-- Samsung India Electronics P. Ltd. v. Deputy CIT (Delhi) . . . 460 S. 148 --Reassessment--Income escaping assessment--Reason to believe--Notice--Information that after group companies were allotted unified access service licences by Department of Telecommunications, assessee obtained shares in those companies at Rs. 10 per share but simultaneously entered into agreement with third party for sale of shares at premium of Rs. 159 per share and that difference was income of assessee which had escaped assessment--New and tangible information supporting inference that sale of shares to assessee undervalued--Adequacy of reasons not to be agitated in writ petition at stage of notice--Failure to furnish copy of 2G investigation report--Not material-- Acorus Unitech Wireless P. Ltd. v. Asst. CIT (Delhi) . . . 417 ----Reassessment--Notice--Condition precedent--Reason to believe income had escaped assessment--Reason must be based on tangible material--Original assessment of profits on sale of shares as capital gains--Similar assessments for prior and subsequent years--Notice on basis of audit objection to assess amount as business income--Notice not valid-- Aroni Commercials Ltd. v. Deputy CIT (Bom) . . . 403 ----Reassessment--Notice--Reason to believe--Duty of Department to communicate information or material on which Assessing Officer records satisfaction--No requirement mandating disclosure of specific document--Where information communicated in accordance with requirement assessee cannot compel disclosure of other documents-- Acorus Unitech Wireless P. Ltd. v. Asst. CIT (Delhi) . . . 417 ----Reassessment--Notice--Writ petition challenging notice--Disposal by court upon undertaking by Department to withdraw notice but with liberty to initiate fresh proceedings--Clear direction of court that fresh proceedings not to be barred--Department complying with order of court--Fresh proceedings not vitiated merely because reasons for fresh proceedings drawn up before communication of withdrawal of earlier proceedings to assessee-- Acorus Unitech Wireless P. Ltd. v. Asst. CIT (Delhi) . . . 417 ----Reassessment--Notice after four years on ground assessee had not reported loan received from its directors and their family members in financial statement filed with return--No sufficient explanation offered by assessee in its objection--Fresh objection before court that loan transaction was margin money reflected in balance-sheet--Not permissible--Reasonable belief on part of Assessing Officer to come to a prima facie view that income chargeable to tax has escaped assessment-- Crown Consultants P. Ltd. v. CIT (Bom) . . . 368 ----Reassessment--Notice after four years--Conditions precedent--Original assessment made after detailed inquiry treating profits on sale of shares as capital gains--All facts necessary for purpose of assessment before Assessing Officer--No failure by assessee to disclose fully and truly all material facts--Notice to bring profits to tax as business income not sustainable-- Vinod Dhudalal Shah v. Asst. CIT (Guj) . . . 345 ----Reassessment--Notice after four years--Conditions precedent--Original assessment made in scrutiny proceedings--Assessing Officer having ample occasion to consider and detect all material disclosed by assessee during original assessment--No denial that details under section 44AB furnished along with return--No failure on part of assessee to disclose material facts necessary for assessment--Notice without jurisdiction-- Talati and Panthaky Associated P. Ltd. v. Deputy CIT (Bom) . . . 362 ----Reassessment--Procedure--Notice--Assessee must file return and seek reasons for notice--Assessee can raise objections which should be considered and disposed of by a speaking order-- Samsung India Electronics P. Ltd. v. Deputy CIT (Delhi) . . . 460 S. 206C --Collection of tax at source--Liquor business--Meaning of “buyer†in section 206C--Licensee under State Act--Not a buyer--Tax cannot be collected at source from such a licensee-- Sankatha Shukla v. Union of India (All) . . . 444 S. 226(3) --Recovery of tax--Protection against attachment--Property exempt from attachment--Public provident fund account--Amount remaining in account would be immune from attachment for recovery of tax dues-- Dineshchandra Bhailalbhai Gandhi v. TRO (Guj) . . . 380 S. 234A --Settlement of cases--Settlement Commission--Powers--No power of rectification--Settlement Commission modifying its directions with respect to charging interest exercising powers of rectification--Not permissible-- Kakadia Builders P. Ltd. v. ITO (Guj) . . . 342 S. 234B --Settlement of cases--Settlement Commission--Powers--No power of rectification--Settlement Commission modifying its directions with respect to charging interest exercising powers of rectification--Not permissible-- Kakadia Builders P. Ltd. v. ITO (Guj) . . . 342 S. 234C --Settlement of cases--Settlement Commission--Powers--No power of rectification--Settlement Commission modifying its directions with respect to charging interest exercising powers of rectification--Not permissible-- Kakadia Builders P. Ltd. v. ITO (Guj) . . . 342 S. 254(2A) --Appeal to Appellate Tribunal--Recovery of tax--Interim relief--Stay of demand--Order of stay must record briefly assessee’s case, look at questions involved in appeal and amount required to be deposited considering issue in appeal--Order of stay granted on ground that for major part of outstanding demand assessee has good prima facie case--Order not stating even prima facie how demand of tax is arguable on merits--Pending appeal--Assessee to deposit further 50 per cent. demand of tax if adjournment at instance of assessee-- Director of Income-tax (Exemption) v. Jamshetji Tata Trust (Bom) . . . 357 S. 273A --Penalty--Reduction or waiver of penalty--Powers of Commissioner--Scope of section 273A--Commissioner to take into account only conditions enumerated in section 273A--Commissioner cannot reject application for reduction or waiver by considering the case like an Assessing Officer-- Kahan Chand v. CIT (P&H) . . . 476 ----Wealth-tax--Penalty--Reduction or waiver of penalty--Section 18B of Wealth-tax Act similar to section 273A of Income-tax Act--Rejection of application for reduction or waiver by considering case like a Wealth-tax Officer--Order not valid-- Kahan Chand v. CIT (P&H) . . . 476 S. 281 --Recovery of tax--Attachment and sale of property--Transfer to defraud Revenue--Power of Tax Recovery Officer under section 281--No power to declare a transfer to be void--Only civil suit would lie-- Karsanbhai Gandabhai Patel v. TRO (Guj) . . . 374 Wealth-tax Act, 1957 : S. 18B --Wealth-tax--Penalty--Reduction or waiver of penalty--Section 18B of Wealth-tax Act similar to section 273A of Income-tax Act--Rejection of application for reduction or waiver by considering case like a Wealth-tax Officer--Order not valid-- Kahan Chand v. CIT (P&H) . . . 476
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