1. Accrual of income – S. 5

The assessee entered into an agreement with another company, under which a certain amount of royalty was payable to the assessee. However, some dispute arose between the assessee and the company and the same was pending before the arbitration. On these facts, the High Court held that there was no real accrual of royalty income which was chargeable under the Act.

2. Additional ground – S. 254

Where the revenue sought to introduce a new source of income by raising an additional ground before the Tribunal, the High Court concurring with the view taken by the Tribunal, held that if the request of revenue is acceded to, it would amount to setting the process of assessment in action by the authorities below for the first time, as the issue sought to be raised in form of additional
ground was not part of subject matter of the assessment order or the order of the first appellate authority.

3. Annual value – S. 23(1)

Property let out to tenant and tenant sub letting the property for higher rent. Amount paid by sub-lessees cannot be assessable as income of the assessee, unless there is evidence to show that the transaction was not genuine.

4. Appeal – Additional ground before CIT(A) – S. 250

By virtue of section 250(5), the CIT(A) is empowered to entertain any new ground raised before him which is not specified in the memorandum of appeal.

5. Appeal – C.O.D. – S. 260A

In case where the assessee is a State-owned Corporation, the appeal filed by the Income Tax Department is not maintainable if the clearance from Committee on Dispute (C.O.D.) is not obtained.

6. Appellant Tribunal is expected to pass a speaking order

Whether Tribunal is expected to apply its mind to facts of each case and thereafter arrive at a conclusion since it is final fact-finding authority and facts determined by it would be conclusive unless they are perverse – Held, yes – whether, therefore, while disposing of an appeal, Tribunal cannot entirely rely upon order passed by subordinate authority without independent application of mind – Held, Yes.

7. Appellate Tribunal – Third member has to restrict himself to the question before him

Third Member must confine himself to order of reference, he has no right to go beyond scope of reference in a matter of difference of opinion between Member of Bench and has no right to enlarge, restrict, modify and/or formulate any question of law on his own on difference of opinion referred to by Members of Tribunal

8. Appellate Tribunal – Under legal obligation to formulate the issue before it and provide reason for the conclusion

The Hon’ble High Court was not able to ascertain the issue and reason for deciding the issue involved in appeal before Appellate Tribunal in its order dated 24-8-2005.

Thus, the Hon’ble Court observed that

"From the order of the Tribunal, it could not be known as to what the Tribunal actually decided in the instant case. The High Court could only know the submission of parties and the decision against the revenue but not the reasons for coming to such conclusion at least in its real judicial sense. Reasons were not there because they were somewhere else and probably in the order passed by the Tribunal in earlier year’s case. In such a situation, the Court could not know those reasons for examining them on merits as an appellate Courts as to whether those so-called reasons existed or not and secondly, whether they were legally sustainable or not and whether those reasons influenced the Tribunal to dismiss the appeal. If the Tribunal feels that it has already decided the issue on merits one way or other in detail by assigning reasons in some earlier case, then certainly, it is not required to again repeat the exercise to deciding the same issue on merits in the subsequent year. But certainly the Tribunal is under a legal obligation to formulate in short the question involved and then quote its reasoning already arrived at in its main leading order in case the Tribunal does not wish to add any more reasoning to its earlier order."

9. Assessment – S. 143(1)(a)

After issuance of notice u/s. 143(2) of the Act by the Assessing Officer, it is not open for him to make prima facie adjustment u/s. 143(1)(a) of the Act.

10. Bad debts – S. 36(1)(vii)

Once the assessee has written off the debt as bad debt, requirement of section 36(1)(vii) is complied with, and the claim of deduction of bad debts is allowable.

11. Block assessment – S. 158BA r.w.s.143(3)

Income which is assessed as undisclosed income for the block period cannot be assessed in regular assessment u/s. 143 of the Act for these years even on protective basis.

12. Block assessment – S. 158BB

(i) No addition could be made in block assessment under Chapter XIV–B of the Act where no incriminating material was found by the revenue during the course of search having nexus with the undisclosed income.

CIT vs. M.S. Agrawal (HUF) – (2008) 11 DTR 169 (MP)

(ii) Once the assessee has paid advance tax and declared the income in his belated return filed after the date of search such income cannot be held as undisclosed income of the assessee.

CIT vs. A. M. Mohan Babu (2008) 10 DTR 235 (Mad.)

(iii) Where the amount of alleged cash credit is shown in the regular return filed by the assessee much prior to the search and seizure action, the amount could not be added while making assessment under the provisions of Chapter XIV–B of the Income-tax Act, 1961.

CIT vs. Tirupati Enterprises (2008) 10 DTR 17 (Raj.)

13. Block sssessment – Satisfaction – S. 158BD

Where no material showing that the undisclosed income of partner of a firm was found during the course of search, the High Court held that there could not be any basis for satisfaction for initiating proceedings u/s. 158BD of the Act against the partner which is mandatory requirement for initiating proceeding u/s. 158BD of the Act.

14. Block assessment – Search and Seizure – Chapter VIA – Advance Tax – S. 158BB

While computing the undisclosed income for the block period, deduction under Chapter VIA is allowable. Amount in respect of advance tax has been paid must be taken into account.

15. Book profit – S. 115J

While computing book profit u/s. 115J of the Act, assessee is entitled to change the method of deprecation from straight line method (SLM) to written down value (WDV). The assessee is entitled to claim the extra amount of depreciation for the current year and also the arrears of past years arising due to change in method for computing depreciation.

16. Business expenditure – Good work reward is not bonus – Ss. 36 (1)(ii), 37(1)

The good work reward given by the assessee to its employee had no relation to profit that assessee might or might not make and it had relation to only good work that was done by the employees during the course of their employment. Thus, the payment made by assessee to its employees under the nomenclature ‘Good Work Reward’ did not constitute bonus within the meaning of section 36(1)(ii) and was allowable as normal business expenditure u/s 37(1).

17. Business expenditure – Advertisement expenses – S. 37(1)

Advertisement expenditure incurred on products of sister concern. Assessee is sole distributor and marketing agent of products of sister concern. Amount spent wholly and exclusively for the purpose of the company’s business and allowable as deduction.

18. Business expenditure – Disputed liability – S. 37

Deduction on account of disputed liability towards purchases made by the assessee in earlier year could be allowed in the year when the supplier filed a suit for recovery of sale consideration, as the assessee was capable of estimating the loss with reasonable certainty at that time.

19. Business expenditure – Exchange loss – S. 37(1)

Exchange loss incurred by the assessee on refund of advance from a foreign buyer upon the cancellation of contract was held to be a payment made on account of commercial expediency, accordingly the same was incurred wholly and exclusively for the purpose of business and the same was allowable as deduction.

20. Business expenditure – Products of television film – S. 37

Expenditure incurred on production of television film for advertising the product manufactured by the assessee is allowable as revenue expenditure.

21. Business Expenditure – Provident Fund (ESI) – S. 43B

Provident Fund (P.F.) and Employees State Insurance (E.S.I.) contribution paid into the funds beyond the due dates prescribed in respective Acts but prior to the date of filing the return of income could not be disallowed u/s. 43B of the Act. The Hon’ble High Court noted that the reasoning given by the Apex Court while dismissing the special leave petition in the case of CIT vs. Vinay Cement Ltd. (2007) 213 CTR (SC) 268, would be binding on the High Court, as law declared by the Apex Court under Article 141 of the Constitution.

22. Business expenditure – Provision for warranty is not contingent liability – It is deductible expenditure – S. 37(1)

The assessee, for the A. Y. 2001-02, claimed deduction of the sum provided in the book towards warranty expenses. The assessee provides warranty to its customers for replacement of defective parts within period of warranty. The same was disallowed on the grounds that amount did not represent an accrued liability. The Hon’ble court confirmed the views of the Appellate Tribunal that warranty liability could not be constructed to be a contingent liability.

23. Business expenditure – Roll over premium – S. 36(1) (iii)

Roll over premium paid by the assessee to the bank with respect to foreign exchange forward contracts to obtain loans in foreign currency is allowable as deduction u/s. 36(1) (iii) of the Act. The High Court further held that even the provision of section 43A of the Act were not applicable as the payments made to the banks had nothing to do with the actual cost of the assets.

24. Business expenditure – Software – S. 37

Expenditure incurred on purchase of software is revenue expenditure.

25. Business expenditure – Stamp Duty – S. 37

Stamp duty and registration charges incurred at the time of execution of lease agreement were allowable as revenue expenditure.

26. Business income – Interest income – S. 28 (i)

Where amount borrowed from bank for expansion of business was invested temporarily pending utilization of the same, interest earned on such investments by the assessee was assessable under the head, ‘Business Income’ and not under the head, ‘Income from Other Source’.

27. Business Loss – loss due to fluctuation in foreign exchange rate on stock-in-trade is revenue loss – S. 28

Where assessee had originally taken a loan for import of capital goods, but at the time when devaluation took place loan had undergone a change of character and had assumed a new character of stock-in-trade or circulating capital, any loss suffered by assessee on account of foreign exchange rate fluctuation would have to be treated as a revenue loss and not as a capital loss.

28. Business Loss – Shares of Subsidiary – S. 28

The subsidiary company had been ordered to wound up, there was no question of any party dealing in the shares of that company. The Tribunal had come to the conclusion that the shares were stock-in-trade and therefore allowed the loss. The loss has to be treated as a trading loss. The mere fact that the shares were not sold was of no significance, since the fact the shares could not have been sold and had became worthless. The departmental appeal was dismissed.

29. Capital gain – S. 2 (47) r.w.s. 45

Where there was no registered sale deed executed between the builder and the assessee and neither the construction work completed and nor the permission for construction granted by the local authorities, a mere grant of right to develop the land to the builder along with possession in order to facilitate the builder to develop the land under a joint collaboration arrangement did not involve transfer of capital asset as envisaged u/s. 2(47) of the Act so as to attract capital gains liability.

30. Capital gains – Do not provide for tax on deemed profit or gain – Ss. 45 & 48

Assessee-company had leased out a plot of land to a company for 72 years at annual rent. It had also received a sum as deposit from lessee which was repayable in 10 yearly installment with 9 per cent interest per annum. Assessing Officer considered 9 per cent of interest at lower side and taking into consideration market rate of interest at 18 per cent, brought differential amount of interest of tax as capital gains. As sections 45 and 48 do not make any provision for any deemed profit or gain to be taxable as capital gain, mere fact that Assessing Officer was of view that prevalent market interest rate was 18 per cent, could not render assessee liable for being taxed on differential amount as capital gains.

31. Capital gains – Long-term – Short-term – S. 45

Assessee purchased the land in 1970 and constructed house partly in 1980. The assessee sold the land and house in the year 1982. The Court held that the gains attributable to land assessable as long-term capital gains and gains attributable to house is assessable as short-term capital gains.

32. Capital gains – Mortgage debt – S. 48

The assessee was not entitled to the deduction on account of mortgage debt to the Bank. It was application of income and not diversion of income by overriding title.

33. Capital gains – Priority of exemption claim – S. 48(2)

While computing the Long Term Capital Gains, the deduction u/s. 48(2) has to be allowed before exemption u/s. 54E.

34. Capital or revenue – Expenditure on Software, Replacement of UPS System and Printer – Revenue Expenditure – S. 37

The court held that the concept of enduring benefit must respond to the changing economic realities of the business. The expenses incurred by installation of software packages in the present computer world, which improves the modern communication technology, enables the assessee to carry on business operation effectively, efficiently, smoothly and profitably. However, such software itself does not work on a stand alone basis. It has to be fitted to a computer system to work. Such software enhance efficiency of the operation. It is an aid in the manufacturing process rather than tool itself. Therefore the payment for such application of software, though there is an enduring benefit, does not result in acquisition of any capital asset hence has to be treated as revenue expenditure.

The court also held that expenditure incurred on replacement of printer was also revenue expenditure.

35. Capital or revenue – Expenses on issue of debentures – Revenue Expenditure – S. 37

The expenses incurred for the issue of debentures are allowable deduction as revenue expenditure.

36. Capital or Revenue Expenditure – Replacing fence with compound wall – Revenue expenditure – S. 37

The expenditure incurred on construction of compound wall in the place of barbed wire fencing was a revenue expenditure.

37. Capital or Revenue Receipt – Restrictive covenant – S. 17(3)(1)

Assessee after retirement executing agreement to refrain from taking up any competitive employment /assignment in future. Receipt is capital in nature being a special compensation after cessation of employment, the said receipt cannot be taxed as profit in lieu of salary.

38. Cash credit – S. 68

Once the assessee proves the existence of his creditors and such person owns up the credits which are found in the books of the assessee, the onus cast upon the assessee stands discharged and the assessee cannot be further asked to prove the source from which the creditors could have acquired the money deposited with the assessee.

39. Condonation of delay – S. 260A

Where the assessee had received loans through account payee cheques and the creditors had confirmed the loans by making statement on oath, the High Court held that in such situation the assessee is not required to establish the capacity of the lenders to advance the money as that would amount to calling upon the assessee to establish source of the source.

40. Co-operative Bank – Deduction – S. 80P

Where additions are made by the Assessing Officer u/s. 68 of the Act by relying solely reliance on the statement of a third person, and the said statement was not given to the assessee nor was the assessee afforded an opportunity to cross examine the said person, on these facts, the High Court held that the addition made by the Assessing Officer is liable to be deleted on the ground that the additions were made in gross violation of principles of natural justice.

Delay in appeals filed by the Income Tax department before the High Court is liable to be condoned only where the delay is less than a year.

Interest earned by the assessee, a co-operative bank on fixed deposit with another co-operative bank in compliance with the State Co-operative Societies Act was held to be income derived from banking business eligible for deduction u/s. 80 P of the Act.

41. Deduction – Gross total income – S. 80HH & 80-I

Deduction u/s. 80-I of the Act is to be computed on gross total income of the assessee without first reducing from it the amount of deduction u/s. 80HH of the Act.

42. Deduction – S. 80HHC & 80-IA

Deduction u/s. 80 IA of the Act is not to be deducted from profits and gains of the business before computing the amount of deduction u/s. 80HHC of the Act.

43. Deduction of tax at source – Packing material – S. 194C

Packing material carrying printed work transaction essentially a sale. Purchaser not liable to deduct tax at source on price.

44. Deemed dividend – S. 2(22)(e)

Normal business transactions entered into between two entities cannot be termed as deemed dividend u/s. 2(22) (e) of the Act because of the share holding pattern of the two companies.

CIT vs. Ambassador Travels P. Ltd. [(2008) 8 DTR (Del) 108

45. Deemed income – Stock Valuation – S. 4

There was difference between stock value shown in accounts and value disclosed to Bank. Inflated stock submitted to avail of higher credit facility from Bank. Neither Bank nor the Assessing officer physically verifying and certifying the stock. Additions deleted.

46. Depreciation – Less than Rs. 5,000/- – S. 32

Where cost of individual part of machinery is less than Rs. 5,000/-, 100 per cent depreciation is allowable on each individual part.

47. Depreciation – Poultry shed – Ss. 32 & 32A

Poultry shed specifically designed is a plant which is entitled to both depreciation and investment allowance.

48. Depreciation – Poultry shed – S. 32

Poultry shed constitutes plant, which is eligible for deprecation @25 per cent.

49. Double Taxation Relief – S. 90

Advertisement revenue received by a Singapore telecasting company through its dependent agent PE in India by way of contracts made outside India on principal to principal basis and paying fee to its agent on an arm’s length price basis would not be liable to income tax in India with respect to advertisement revenue received by the assessee.

50. Employees’ contribution to PF – S. 43B

PF deposited by assessee into Govt. A/c. with some delay. As the deletion of second proviso to Sec. 43B by the Finance Act, 2003 w.e.f. 1-4-2004 being curative, it is justified to delete the addition.

51. Export – Deduction – S. 80HHC

Commission earned by the assessee, a supporting manufacturer, from export house was an integral part of sale price and constituted profit eligible for deduction u/s. 80 HHC of the Act.

While computing deduction u/s. 80 HHC of the Act, ninety per cent (90%) of the export house premium is not to be excluded under clause (baa) of Explanation to s. 80HHC of the Act.

Deduction u/s. 80 HHC of the Act could not be denied to the assessee where the audit report in Form No. 10 CCAB as prescribed under the Income Tax Rules were filed during the assessment proceeding when the assessee made the claim for deduction u/s. 80HHC of the Act for the first time by filing audit report.

52. Hotel – Special deduction – S. 80-IA(4)(iii)

When a hotel was granted certificate by prescribed authorities, Income Tax authorities had no jurisdiction to decide on basis of its own criteria that the assessee is not entitled to special deduction under section 80-IA.

53. Income – S. 4

Amount received and spent by the election agent of the assessee could not be treated as income in the hands of the assessee, as there was no evidence to show that amount was used by the assessee for only personal purpose of the assessee.

54. Income – S. 4 & 56

Where the assessee’s business had not commenced, the interest income earned on fixed deposits kept as margin money with the bank to obtain letter of credit (L.C.) facilities for import of capital goods is required to be credited against the pre incorporation expenses and cannot be taxed under the head Income from Other Sources.

55. Income from Other Source – S. 56

Where money borrowed for the purchase of plant and machinery was put in short-term deposits during the period of construction, interest received on such deposit was assessable under the head Income from Other Sources and cannot be set off against actual cost of plant and machinery.

56. Income from undisclosed source – Sales – S. 4, 143(3)

The entire sale proceeds cannot be regarded as profit or treated as undisclosed income of the assessee. On the contrary, it is the net profit rate which has to be adopted in such cases.

57. Interest – S. 220

For the purpose of granting wavier of interest chargeable u/s. 220 of the Act, all the three conditions prescribed in clauses (i), (ii) and (iii) of section 220(2A) may not be cumulatively satisfied by the assessee.

58. Interest – S. 234B & C

In absence of any specific order by the Assessing Officer charging interest u/s. 243 B & C of the Act, the charge of interest u/ss. 234B & C was held to be not tenable.

59. Interest – S. 234B & C r.w.s. 115J

While computing income under the provisions of section 115J of the Act, interest u/s. 234B and 234C of the Act is chargeable.

60. Interest – S. 234B r.w.s. 115J

When income is computed u/s. 115J of the Act, interest u/s. 234B of the Act is not chargeable.

61. Interest Tax Act, 1974 – S. 2(7)

Amount received by a financial institution, as additional amount from borrowers towards payment of its Interest tax liability was not ‘interest’ within the meaning of section 2(7) of the Interest tax Act, 1974 and could not be treated a chargeable interest.

62. Kar Vivad Samadhan Scheme – Finance Act, 1998, S. 95(i)(c)

For the purpose of admissibility of a declaration under the KVSS, it is enough that an appeal is pending, even if it is irregular or incomplete.

63. Kar Vivad Samadhan Scheme, 1998 – Reassessment

Once amount is paid under KVS Scheme and certificate obtained, assessment can not be reopened.

64. Limitation – S. 153(2)

Time limit of two years for completion of assessment is applicable under provision to sec. 153(2) as amended w.e.f. 1-6-2001, only in cases where notice u/s. 148 was served on or after
1-4-1999 but before 1-4-2000.

65. Manufacture – Construction of flats – S. 80J

Activity of construction of flats and shops is not a manufacture or production of article or thing and not eligible for deduction u/s. 80J of the Act.

66. Method of Accounting – S. 145 r.w.s. 32

Where the Assessing Officer adopted net profit rate and estimated the income of the assessee, deprecation was still allowable.

67. Mutuality – Income – S. 4

Interest earned on the fixed deposit by a Company formed for the benefit of certain section of shopkeepers, was held to be not exempt from tax on the principle of mutuality as the memorandum and article of association of the Company permitted it to do various businesses, which involved commercial activities.

68. Notice – Assessment – Ss. 143, 282

Notice under section 143(2) was sent by registered post, which was received back undelivered. The notice ought to have been sent along with acknowledgment due. Hence, no notice under section 143(2) of the Act had been served upon the assessee within prescribed period, and therefore the assessment was invalid.

69. Partnership Firm – Remuneration to be allowed out of the additional income declared in survey – S. 40(B)

Where the additional income declared during the course of survey action was found to be business income of the firm, the remuneration to the partners has to be allowed out of the additional income also.

70. Penalty – Certificate – S. 272A(2)(g)

When there is compliance of section 203 of the act read with the relevant rules, penalty u/s. 272 A(2)(g) of the Act cannot be imposed even though there is delay in payment of TDS amount by the assessee.

71. Penalty – Concealment – S. 271 (1) (c)

No penalty u/s. 271(1)(c) of the Act can be levied on the assessee on the ground that the assessee failed to produce the depositors after a lapse of 17 years from the date of loan received by the assessee. The High Court also held that the Tribunal was not justified in confirming the levy of penalty on the addition made u/s. 68 of the Act, merely on the statement given by the depositors in some other proceeding without allowing the assessee to cross-examine the depositors.

Penalty u/s. 271(1)(c) was not leviable where the assessee claimed deduction u/s. 80IB of the Act by making a mistake in calculation of number of years, as in such a case it cannot be said that the assessee deliberately concealed or furnished inaccurate particulars of his income.

72. Penalty – Loan or Deposit – S. 271D

No penalty u/s. 271D r.w.s. 269SS if the Assessee has accepted cash loans of Rs. 20,000/- from each person.

73. Precedent – Appellate Tribunal – Bound by the order of the jurisdictional High Court

The A.O. levied Additional Tax u/s 143(1A) in a case where the return of income was loss and the assessed income after adjustments resulted into loss. In appeal, levy of additional tax was deleted. On an appeal by the Department to the Appellate tribunal, the CIT(A)’s order was reversed though the decision of the jurisdictional High Court in the case of CIT vs. Premier Industries Pvt. Ltd., (1997) 227 ITR 282 (MP) was cited.

The Hon’ble Court commenting on the binding nature of the High Court order, observed that "It is neither permissible nor legal for any Court and Tribunal to comment upon the decision of the Supreme Court/High Court. Similarly, it is also not permissible for the Tribunal to comment upon the manner in which a particular decision was rendered by the Supreme Court/High Court. It is also not permissible for the Tribunal to sidetrack or/and ignore the decision of the High Court on the ground that it did not take into consideration a particular provision of law. If such an approach is resorted to by subordinate Courts/Tribunals, then it is held to be not in conformity with the law laid down by the Supreme Court. It was deprecated by the Supreme Court as being improper."

74. Purchase of Immovable Properties – S. 269 UD

Where the Fair Market Value of the property in question was not determined by the Appropriate Authority and neither the sales instances relied upon by the revenue authorities supplied to the seller despite specific request by the seller, the High Court held that the impugned order u/s. 269 UD of the Act was not sustainable.

75. Reassessment – Change of opinion – S. 147

Notice u/s. 148 of the Act issued beyond four years was held to be bad in law and without jurisdiction where the revenue authorities failed to demonstrate that there was failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment.

Where the assessee had fully and truly disclosed the facts with respect to its claim of interest and capital gain in form of a note to its computation of income which were very much in knowledge of the Assessing Officer while framing the original assessment, reopening of assessment thereafter, was held to be a mere change of opinion which is not the reason for reopening of the assessment u/s. 147 of the Act.

76. Reassessment – Notice – Assessment Not Finalised – Ss. 148, 147

When the valid assessment is pending, the Assessing Officer cannot issue notice under section 148 for the purposes of reopening under section 147.

77. Reassessment – Notice – S. 148

Whether on the facts when assessment has been framed u/s. 158BA in relation to undisclosed income for the Block Period, a notice u/s. 148 could be issued for reopening of such assessment. Held, no. Notice u/s. 148 deserves to be quashed.

78. Reassessment – Recorded reasons – S. 147

Notice u/s. 148 issued by the Assessing Officer other than the one who recorded reason to believe was held to be invalid.

Reopening of assessment proceeding on the basis of finding of another Assessing Officer in a later year suffered from change of opinion and held to be invalid.

Reopening of assessment for A.Y. 1946-47 was held to be invalid where the revenue authorities failed to produce record for reassessment proceedings and there was nothing on the record to suggest that necessary approval was granted by the C.B.D.T. for reopening the assessment.

The Hon’ble High Court quashing the reassessment order passed by the Assessing Officer held that where during the reassessment proceedings it transpired that the income alleged to have been escaped as mentioned in the reasons recorded had not actually escaped assessment, in the same reassessment proceedings the Assessing Officer had no jurisdiction to add other income which was found to have escaped assessment,
while recording the reasons for reopening the assessment.

79. Reassessment – Recorded reasons – Ss. 147 & 148

Notice issued by the Assessing Officer without recording reasons, which is mandatory requirement of section 148 of the Act, the entire proceeding and consequential orders passed by the Assessing Officer are void ab initio.

Assessing Officer is bound to record reasons for reopening the assessment before issuing any notice u/s. 148 of the Act. This is a mandatory requirement, and the Assessing Officer is not permitted to record the reasons between the date of issue of notice and service.

80. Reassessment – Revised Return – S. 147

Where the assessee withdrew the excess claim of depreciation by filing revised return u/s. 139 (5) of the Act within time, the reason to believe for reopening the assessment, become non-existent and the action of the Assessing Officer making reassessment and consequential additions on account of other items was held to be invalid.

81. Reassessment – Later Supreme Court decision – S. 147

Where while framing assessment u/s. 143 (3) of the Act the Assessing Officer allowed deduction u/s. 80HH and 80I as per the prevailing law, the assessment cannot be reopened after the expiry of four years on the basis of subsequent Supreme Court decision.

82. Recovery – Attachment by tax recovery officer of the properties owned by the assessee only – S. 220(6)

The powers of Tax Recovery Officer under rule 11 of Second Schedule relate only to properties ostensibly and apparently owned by assessee. If the property is ostensibly and apparently in name of third party, then if income tax authorities claim that said property is actually possessed or owned by assessee in default, they shall have to establish their claim in civil court.

83. Recovery – Stay Application has to be disposed of by passing a speaking order – S. 220(6)

The stay application filed under section 220(6) should be disposed of by passing a speaking order giving consideration to relevant factors, as required by law and as mentioned in Instruction No. 1914 issued by CBDT.

84. Recovery of Tax – S. 220(6)

Where assessee files an application for stay when the appeal is pending before the CIT(A), unless the Assessing Officer rejects the application, he cannot direct for attaching the assesse’s bank account.

85. Repairs – Replacement of machinery – S. 37

Expenditure on repairs and replacement of machinery having been incurred for the purpose of running existing machinery more efficiently was held to be revenue in nature.

86. Revision – Prejudicial to the interest – S. 264

No order prejudicial to the interest of the assessee can be passed u/s. 264 of the Act and any order passed on revision application u/s. 264, cannot be sustained to the extent it is adverse to the interest of the assessee.

87. Revision – S. 263

Where the Assessing Officer allowed the payments to sub – contractors as genuine after verification of all the evidences placed on record by the assessee, the High Court held that under these circumstances the Commissioner was not justified in exercising his revisional jurisdiction u/s. 263 of the Act on the basis of material collected at the time of revisional proceedings.

88. Salary Income – Ss. 10(10C) & 89

Amount received by the employees of the Reserve Bank of India opting for the ‘Optional Early Retirement Scheme’ is eligible for deduction u/s. 10 (10C) of the Act as all the condition of rule 2BA of the Income Tax Rules, 1962 were complied with. The Hon’ble High Court further held that the employees were also entitled for relief u/s. 89 of the Act.

89. Search & Seizure – Statement on Oath – S. 132(4) r.w.s 139 (5)

A letter written to the Assessing Officer by a partner of the firm admitting a higher amount of undisclosed income than the income disclosed u/s. 132(4) of the Act and also stating that the firm will file a revised return in accordance with the statement made by him, cannot be considered as a statement u/s. 132 (4) of the Act. The court further held that the letter so filed by the partner cannot be treated as a revised return and cannot be used as a basis for making assessment.

90. Search & Seizure – Validity – S. 132 (1)

As the assessee being a non trading corporation the existence of condition regarding possession of money, bullion, jewellery or other valuable article or thing is ruled out and there being no summons or notice which the assessee failed to respond, none of the condition prescribed u/s. 132 (1) of the Act were satisfied and therefore the warrant of authorisation was quashed by the High Court.

91. Search and Seizure – Addition – Retraction of Statement – Ss. 132(4), 158BB

Statement made in the course of search and seizure was retracted only after issue of summons, addition cannot be made merely on the basis of statement.

92. Service of notice – Date of issue is not date of service – S. 143(2)

A notice was sent by speed post one day before the period of limitation was to expire, i.e., on 30-10-2002 and the Department contended that the notice may be deemed to served within the due time. The Hon’ble Court held that what is required by the statute is not merely the dispatch or issuance of notice but its actual service.

93. Tax Deduction at Source – S. 194A

There is no obligation upon the person to deduct tax at source while paying compensation for agricultural land at any place including in an urban agglomeration as the section itself excludes agricultural land from its preview.

94. Undisclosed Investment – S. 69

Where the finding of fact recorded by the CIT(A) that the report of the DVO was not reliable was not challenged by the Revenue authorities, addition made by the Assessing Officer to the income of the assessee on account of difference between the value of the property declared by the assessee and that estimated by the DVO was held not tenable at all.

95. Unexplained Expenditure – S. 69C

Burden is on the Revenue to show that the amount credited in the name of the assessee in the books of the third party constituted income of the assessee for the purpose of section 69C of the Act. Thus, if Revenue authorities failed to discharge this burden addition u/s. 69C was not called for. The High Court also held that the proviso to section 69 C of the Act w.e.f. 1-4-1999 is not retrospective and would not apply to earlier years.