Category: In the High Courts: Part A-Reported Decisions

6. Munchener Ruckversicherungs Gesellshaft Aktiengesellschaft In Munchen vs. CIT (International Taxation)

[2025] 473 ITR 53 (Del.):

A. Y. 2015-16

Date of order: 3^rd September, 2024

S. 155(14) and 264 of ITA 1961

Revision — Non-resident — Application by assessee for revision — Provisions of section 155(14) — Claim for tax deducted at source on amount not taxable in India — Credit not reflected in Form 26AS at time when return originally filed for relevant assessment year but reflected in subsequent assessment year — Commissioner cannot reject application on ground revised return not filed — Department to refund tax deducted at source with statutory interest:

The assessee was a non-resident. For the A.Y. 2015-16, the assessee declared nil income asserting that its receipt of an amount would not be subject to tax in India in terms of the provisions u/s. 90 of the Income-tax Act, 1961 and claimed refund of tax deducted at source on the basis the tax credit statement being form 26AS, which included the tax deducted by an entity BALIC. The assessee submitted that the tax deducted at source pertaining to the last quarter of F. Y. 2014-15 was credited by BALIC on 21^st January, 2016, that consequently, the original tax deducted at source stood increased. In the return for the A. Y. 2016-17 wherein the claim for tax deducted at source credit stood embedded on account of such amount having by then being captured in form 26AS and which amount had remained unclaimed in A. Y. 2015-16.

The Commissioner (International Taxation) was of the view that since the income received from BALIC was offered to tax, the assessee would not be entitled to the grant of tax deducted at source credit. He held that the assessee had failed to file revised return of income and rejected the assessee’s application u/s. 264.

The Delhi High Court allowed the writ petition filed by the assessee and held as under:

“i) Section 155 of the Income-tax Act, 1961 prescribes that where credit for tax has not been given on the ground of either a certificate having not been furnished or filed, but which is subsequently presented before the Assessing Officer, it would be sufficient for the assessment order being amended. Section 155(14) places the Assessing Officer under a statutory obligation to amend the order of assessment once it is established that the contingencies stated in that provision are duly established. Sub-section (14) neither contemplates nor mandates the original return being amended or revised and takes care of contingencies where tax deducted at source is either subsequently credited or is reflected in form 26AS after a time lag. An assessee may face such a spectre on account of a variety of unforeseeable reasons.

ii) Since the tax which was deducted at source by BALIC stood duly embedded in form 26AS which was produced by the assessee and the income earned from that entity had never been held to be subject to tax under the Act, the refusal on the part of the Department to refund that amount was illegal and arbitrary. The factum of tax having been deducted at source by BALIC and pertaining to income transmitted in the A. Y. 2015-16 was not disputed and stood duly fortified from the disclosures which appeared in form 26AS pertaining to that assessment year. It was also not disputed that BALIC had credited the tax deducted at source on 21st January, 2016 and as a consequence of which, the credit was not reflected at the time when the return had been originally filed for the assessment year 2015-16.

iii) The order passed u/s. 264 rejecting the assessee’s application was quashed. The Department was directed to refund the amount of tax deducted at source along with statutory interest.”

BCAJ Admin

5. CIT (International Taxation) vs. Zebra Technologies Asia Pacific Pte. Ltd.

[2025] 472 ITR 745 (Del.):

A. Ys. 2017-18

Date of order: 23^rd October, 2024

S. 263 of ITA 1961

Revision — Revision order — Validity — Non-resident — Claim for benefits under DTAA — Opinion of Commissioner that assessee conduit company used for treaty shopping not stated in notice — Assessee not given an opportunity to satisfy Commissioner regarding his view — Order of Tribunal setting side revision order not erroneous:

The assessee was a non-resident and distributed electronic products and services related to after sales, repairs, and technical support services to the customers across the globe. It held tax residency certificate of Singapore and sought to avail of the benefit of India-Singapore Double Taxation Avoidance Agreement ([1982] 134 ITR (St.) 6). In the A. Y. 2017-18, the assessee received a sum for rendition of technical support, repairs and maintenance services under an agreement with an Indian entity and also an amount in USD from offshore sale of products. According to the assessee, since it did not have a permanent establishment in India and also did not make available technical know-how, knowledge, and skill to the Indian entity under the agreement, the receipts were not chargeable to tax in India under the Act by virtue of the Double Taxation Avoidance Agreement. The Assessing Officer accepted the assessee’s explanation in response to the notices u/ss. 142(1) and 143(2) of the Income-tax Act, 1961 during the assessment proceedings which culminated in an assessment order.

The Commissioner was of the view that the Assessing Officer did not conduct the necessary inquiries and verified the facts for accepting the assessee’s claim that its income was not chargeable to tax under the Act by virtue of India-Singapore Double Taxation Avoidance Agreement, that he did not call for the relevant details or verified whether the assessee had a permanent establishment in India during the relevant period, that he did not carry out any inquiry to ascertain whether any commercial substance existed in Singapore and whether the assessee was merely a conduit company and used with an object to obtain the tax benefit under the Double Taxation Avoidance Agreement. Accordingly, he invoked his power u/s. 263.

The Tribunal faulted the Commissioner for not affording the assessee an opportunity to rebut the allegations that it was merely a conduit without any substance and had entered into an agreement for the purposes of taking an advantage of the Double Taxation Avoidance Agreement and allowed the appeal filed by the assessee.

The Delhi High Court dismissed the appeal filed by the Revenue and held as under:

“i) There was no fault with the order of the Tribunal in setting aside the revision order passed by the Commissioner u/s. 263 on the ground that the assessee was not afforded an opportunity to counter the allegation that it was a conduit company without any substance.

ii) In the show-cause notice the Commissioner had faulted the Assessing Officer for not undertaking certain enquiries including verifying whether, (i) the assessee had a permanent establishment in India, (ii) in terms of section 9(1)(vii) of the Act, the income was chargeable as fees for technical services, (iii) tax at source at the rate of 10 per cent. on all the remittances made to the assessee were deducted, (iv) the condition as set out in article 12 of the India-Singapore Double Taxation Avoidance Agreement in regard to taxation of fees for technical services were satisfied, (v) regarding the commercial substance of the assessee in Singapore and (vi) it was a conduit company formed for obtaining the tax benefits under the Double Taxation Avoidance Agreement.

iii) These observations were made only for the purposes of calling upon the assessee to show cause why the proceedings not be initiated u/s. 263 of the Act but, thereafter, the Commissioner had not put the issue regarding treaty shopping to the assessee. The tentative opinion formed by the Commissioner that the assessee was a conduit company for the reasons as articulated in the revision order was not put to the assessee. Hence, the assessee had not been given an opportunity to satisfy the Commissioner regarding such view for the A. Y. 2017-18.”

BCAJ Admin

4. Sushen Mohan Gupta vs. Principle CIT

[2025] 473 ITR 173 (Del.)

A. Y. 2010-11 to 2020-21

Date of order: 22^nd March, 2024

Ss. 156, 220(1), 220(6) and 246A of ITA 1961

Recovery of tax — Grant of stay of demand — Stay of recovery pending appeals before Commissioner (Appeals) — Effect of office memorandum issued by CBDT — Rejection of stay of demand for non-deposit of 20% of disputed demand — Application to the Principal Commissioner — Direction to deposit 40% — Authorities failed to consider prima facie merits of the case — Financial hardship and likelihood of success — Orders rejecting stay of demand unsustainable — Matter remanded to the AO with directions to consider in light of earlier decision:

A search and seizure action was conducted and subsequently notices u/s. 153A of the Act for the A.Ys. 2010-11 to 2019-20 were issued and on culmination of proceedings so drawn, the assessment orders came to be framed on 30^th September, 2021 raising a cumulative demand of ₹ 1,85,62,19,390 for the A.Ys. 2010-11 to 2020-21.

The Assessee filed appeals before the CIT(A) which are pending. Against the enforcement of demand, the Assessee filed application for stay of demand before the Assessing Officer which came to be rejected on the ground that the Assessee had not deposited 20% of the outstanding demand and therefore the application could not be entertained. In rejecting the assessee’s application for stay of demand, the Assessing Officer relied upon the Office Memorandums of the CBDT dated 29-02-2016 and 31-07-2017.

Thereafter, the Assessee filed application for rectification of mistakes which was disposed and the revised demand recoverable from the Assessee was computed at ₹1,81,37,14,107. The Assessee thereafter filed another stay application before the Assessing Officer for the A.Ys. 2010-11 to 2020-21. During the pendency of the said stay application, the Assessee was served with a letter seeking payment of the outstanding demand followed by a demand notice issued u/s. 220(1) of the Act. In response to the aforesaid, the Assessee filed a detailed response stating that the original assessment was wholly arbitrary and rendered unsustainable in the light of the judgment of the Supreme Court in the case of Pr.CIT vs. Abhisar Buildwell Pvt. Ltd. The Assessee also offered to pledge properties owned by an entity in which the Assessee’s family members were directors / shareholders to secure the outstanding demand to the extent of 20%. The Assessee’s prayer was rejected.

Aggrieved, the Assessee approached the Principal Commissioner for grant of interim protection against the outstanding demands. The Principal Commissioner disposed the application by observing that during search operations, various incriminating documents were found and seized and credible evidence were collected. He, thus, disposed of the applications of stay of demand and directed the assessee to deposit demand which was 40 per cent of total outstanding demand within 15 days of receipt of his order.

The Assessee filed a writ petition before the High Court. The Delhi High Court allowed the writ petition and held as follows:

“i) The Central Board of Direct Taxes’ Office Memorandum [F. No. 404/72/93-ITCC], dated 29^th February, 2016 could not be read as mandating a pre-deposit of 20 per cent. of the outstanding demand, without reference to the prima facie merits of a challenge that may be raised by an assessee in respect of an assessment order.

ii) The assessee had approached the Principal Commissioner in terms of the provisions made in the Office Memorandum dated 29^th February, 2016. The view taken by the second respondent, that applications for stay could neither be countenanced nor entertained till the assessee deposited 20 per cent. of the pending demand was untenable and erroneous. The Principal Commissioner had proceeded to cause even greater prejudice to the assessee by requiring him to deposit 40 per cent. of the outstanding demand.

iii) According to para 4(C) of the Office Memorandum [F. No. 404/72/93-ITCC], dated February 29, 2016 stated to the effect that where stay of demand was granted by the Assessing Officer on payment of 15 per cent. of the disputed demand and the assessee was still aggrieved, he could approach the jurisdictional administrative Principal Commissioner or the Commissioner for a review of the decision of the Assessing Officer. The Principal Commissioner could not be recognised to stand empowered to subject the assessee to more onerous conditions. Rather than examining the challenge raised by the assessee to the assessment orders and evaluating the prima facie merits of the challenge had in one sense placed him under a harsher burden of depositing 40 per cent. of the outstanding demand as opposed to the direction of 20 per cent. deposit by the second respondent as a pre-condition for the consideration of application for stay under section 220(6) .

iv) Both the authorities had failed to consider the aspect of prima facie merits, likelihood of success and undue hardship. Therefore, their orders were unsustainable and hence quashed and set aside. The matter was remitted to the Assessing Officer to examine the applications for stay afresh considering the legal position.”

BCAJ Admin

3. Sesa Sterlite Ltd. vs. ACIT

[2025] 472 ITR 591 (Bom.)

A. Y. 2009-10

Date of order: 4^th September, 2024

Ss.10B, 133A, 147 and 148 of ITA 1961

Reassessment — Exemption u/s. 10B — Newly established hundred per cent. export oriented establishments — Reassessment — Notice — Survey — Denial of claim for deduction u/s. 10B in original assessment — Grant of deduction by Tribunal — Fresh survey during pendency of revenue’s appeal before court — Reassessment on ground of availability of new material would tantamount to getting over anomalous situation — Reassessment proceedings to disallow claim for deduction once again impermissible — Notice and order rejecting assessee’s objections quashed and set aside:

The assessee was in the business of manufacturing and production of iron ore and had three units situated at Amona, Chitradurga and at Codli. These units are export-oriented undertakings and for the assessment year 2009-10, the assessee claimed deduction u/s. 10B. A survey u/s. 133A was carried out at the assessee’s premises wherein the authorities sought to ascertain the relevant facts in connection with the claim for deduction u/s. 10B. The Assessing Officer issued a notice dated July 16, 2014 u/s. 148 to reopen the assessment u/s. 147. The Assessees objections were rejected.

The Assessee filed a writ petition and challenged the notice and the order rejecting the objection. The Bombay High Court allowed the writ petition and held as under:

“i) Section 10B(2) provided that section 10B applied to any undertaking which fulfilled all the conditions therein. The assessee had claimed deduction u/s. 10B in respect of the three export-oriented units for the A. Y. 2009-10 and a survey u/a. 133A had been carried out at its premises in connection with the claim for deduction u/s. 10B. The assessment order u/s. 143(3) was passed by the Assessing Officer whereunder the claim for deduction u/s. 10B was disallowed in its entirety for the reasons given by the Assessing Officer. He had held that the assessee’s units were not engaged in the business of manufacture and production of any article or thing, that the assessee had not produced satisfactory evidence with regard to the date of commencement of production, that the approval granted by the Development Commissioner for one unit was not ratified by the Board and that the profits of the units was determined without taking into consideration the cost of the wastage from other units which was utilised in the alleged production that was carried out in the unit under reference, and the units were not new units and the setting up of the units in the old mines which were operated by the assessee could not be regarded as new units and that the assessee had not maintained separate books of account for the export oriented units. The Commissioner (Appeals) had upheld the denial of the claim of deduction under section 10B by the Assessing Officer. The Tribunal had dealt with all the reasons given by the Assessing Officer and had upheld the claim for deduction u/s. 10B. Therefore, entitlement to deduction u/s. 10B had been the subject matter of appeal before the appellate authorities. During the pendency of the tax appeal before this court, a fresh survey was conducted u/s. 133A and on the basis of the materials which were found during the survey in 2014, reassessment u/s. 147 was sought to be justified for the purpose of denying the claim for deduction u/s. 10B. Thus, the reasons of the Assessing Officer in support of his finding could be several but what was relevant was the subject matter of the tax appeal. The third proviso to section 147, which provided that the Assessing Officer could assess or reassess such income, other than the income involving matters which were the subject matters of any appeal, reference or revision, which was chargeable to tax and had escaped assessment, would come into effect.

ii) When the fresh survey u/s. 133A was conducted in the year 2014 during the pendency of the tax appeal before this court, the new materials found by the Assessing Officer were sought to be placed before the Tribunal and this court and the issue under consideration was whether the assessee was entitled to claim deduction u/s. 10B. Assuming that the reassessment proceedings u/s. 147 was allowed to continue on the basis of the new materials a situation could arise to be held that the assessee was entitled to claim deduction u/s. 10B, whereas in the reassessment proceedings, the Assessing Officer on the basis of the new materials could conclude that the assessee was not entitled to claim deduction u/s. 10B.

iii) Reassessment proceedings were obviously to get over such an anomalous situation that the third proviso to section 147 was meant to cover. If the reassessment proceedings were allowed to continue, it would virtually amount to having an effect of sitting in appeal over the orders passed by this court and the Tribunal which could not be countenanced. Though it was the allegation that fresh evidence was unearthed during the course of fresh survey in March 2014, which indicated that the units considered as new units were not new units but an amalgamation of the existing units. The exercise really was to rely on these materials in support of the findings earlier recorded by the Assessing Officer which was already subject matter of challenge before the competent forum. Assumption of jurisdiction to reopen the assessment was without jurisdiction to once again disallow a claim for deduction u/s. 10B. The notice dated 16^th July, 2014 issued u/s. 148 to reopen the assessment u/s. 147 for the A. Y. 2009-10 and the order rejecting the assessee’s objections were quashed and set aside.”

BCAJ Admin

2. Chamber of Tax Consultants & Ors vs. DGIT (Systems)

[2025] 473 ITR 85 (Bom.)

A. Y. . 2024-25

Date of order: 24^th January, 2025

Ss. 87A, 115BAC, 139, 139(5) and 139D of  ITA 1961

Public Interest Litigation — Return of Income — Filing of return in electronic form — Modification of online filing system —Jurisdiction of revenue authorities — Utility not providing for making claim for rebate under section 87A read with proviso to section after 5-7-2024 — Attempt to restrict or prohibit assessee from making particular claim at threshold itself in return of income unconstitutional — No provision under Act which debars assessee to make claim under section 87A qua tax computed at rates specified in provisions of chapter XII other than section 115BAC — Statutory safeguards and remedies in provisions of Act for consequences if claim made in self assessment found to be incorrect or not bona fide — Allowance or disallowance of claim to be deduced by interpretative and adjudicating process — Assessee cannot be debarred from making claim in return of income whether online or manual — Directions issued to modify utility to enable assessees file returns or revised returns of income — NFAC cannot continue assessment proceedings in concluded assessment — Assessment order passed by NFAC set-aside:

The Department releases utility for filing income tax returns online every year. The Department published a change in utility with effect from 05-07-2024. The said change unilaterally disabled the assessees from claiming rebate u/s. 87A. As a result, taxpayers, despite being statutorily eligible, were effectively deprived of their entitlements solely due to technical modifications introduced by the revenue.

The Chamber of Tax Consultants filed a petition seeking direction to modify the system and put in place by the Department for filing income tax returns for AY 2024-25 so as to allow the assessees at large to take benefit of rebate available u/s. 87A. It was contended that this unilateral modification is arbitrary, lacks justification, and deprives eligible taxpayers of statutory benefits. The Respondents’ actions violate the principles of fairness and transparency expected from public authorities and seek judicial intervention to ensure compliance with statutory provisions.

The Bombay High Court allowed the petition and held as follows:

“i) The Department could not restrain or prohibit an assessee from claiming section 87A rebate by modifying their utility by which an assessee was forbidden at the threshold itself from making such a claim in the return of income. The provisions of the Act were not so clear as to arrive at a definite conclusion that a rebate under section 87A could not be granted from the tax computed under the other provisions of Chapter XII. Certainly, such a claim whether eligible or not could be examined in the proceedings under section 143(1) or section 143(3). Merely because few selected cases were picked up for scrutiny would not mean and would not authorise any authority under the Act to prevent an assessee from making the claim on which more than one view was possible. Merely because many returns of income were required to be processed and only a few of them were selected for scrutiny assessment under section 143(3) could not be a ground to tweak the utility to prevent at the very threshold, an opportunity to raise a claim on a debatable issue based upon the interpretation of the provisions in sections 87A and 115BAC. Considering the mandates of articles 265 and 300A, ends, howsoever laudable, cannot justify means.

ii) Assuming that the legal provisions were ambiguous, the Department cannot resolve such ambiguity by adopting an interpretation favouring itself through the device of simply tweaking the utility and preventing the assessee from even raising a claim. Therefore, the main question is not whether the interpretation proposed by the learned counsel for the petitioners or that proposed by the learned Additional Solicitor General is correct, but the main question is whether the Department can insist that its interpretation prevails or triumphs because it has the capacity to and has exercised this capacity to tweak the utility and prevent an assessee to even raise a debatable claim. The provisions of the Income-tax Act do not permit the Department to do this without transgressing the constitutional boundaries

iii) The issue raised on the claim u/s. 87A was, at best, highly debatable and contentious. Therefore, the Department would not be justified in assuming that its interpretation was open and shut, and based upon such a conclusion, shut out bona fide claims for rebate under section 87A and could not be done by exercising administrative powers instead of quasi-judicial powers. Disputed claims, except to the limited extent explicitly permitted by the law, could not ordinarily be disposed of by the executive acting in its executive capacity. This is more so when the executive is itself a party to the lis. One of the foundations of our Constitution is the rule of law. This posits that all three organs of governance, the Legislature, the Executive, and the Judiciary function under and in accordance with the law as enshrined in our Constitution.

iv) The Department did not show any provision under the Act which expressly debarred an assessee to raise or make the claim u/s. 87A qua the tax computed at the rates specified in the provisions of Chapter XII other than section 115BAC. There was no rebuttal to the petitioner’s contention that a provision like section 112A(6) had been expressly enacted wherever the Legislature intended to deny such a benefit. Therefore, in so far as the prayers of the petitioners were concerned that the utility should permit an assessee to at least make a claim under section 87A, it could not be rejected at the threshold.

v) Whether rebate u/s. 87A was to be allowed only on the tax calculated in accordance with the provisions of section 115BAC or also on taxes calculated under other provisions of Chapter XII would require interpretation of the interplay of section 87A and section 115BAC To what extent the overriding provisions contained in section 115BAC(1A) would result in allowability or denial of rebate under section 87A would have to be examined by interpretative process. The impact of the phrase “subject to the provisions of this Chapter” would also have to be examined along with other provisions for adjudicating the claim under section 87A. What was the purport of the proviso to section 87A on the claim proposed to be made would have to be interpreted in conjunction with the provisions of section 115BAC(1A) and other connected sections. How the phrase “total income” should be construed for section 87A and section 115BAC along with the definition sections, charging sections and scope of total income and the scheme of the Act, would have to be examined. Whether the provisions of section 115BAC restricted itself only to tax rates or computation of total income would also have to be examined. If such exercise was required to be undertaken before coming to a definite conclusion as to whether the rebate under section 87A was to be granted or denied on the tax computed under the provisions of Chapter XII other than section 115BAC, had to be deduced by interpretative and adjudicating process. Therefore, the Department was not justified in modifying the utility from 5th July, 2024, by which an assessee was debarred at the threshold from making the claim, which claim was contentious or debatable.

vi) A combined reading of section 87 and section 87A would mean an assessee has to make a claim, the entitlement of which is to be examined by processing the return under section 143(1) or section 143(3) and the same should be allowed as a deduction. Section 87 which provides for rebate under section 87A uses the phrase “there shall be allowed from the amount of income tax . . .”. The proviso to section 87A uses the phrase “. assessee shall be entitled to a deduction . . .”. If a claim was not made, the Department could contend that the claim could not be allowed.

vii) In the absence of any concrete case, the petitioner’s prayer to direct the Department to make the utilities for filing the return of income online flexible so as to allow an assessee to self compute the income and there should not be any restriction on making of any claim whatsoever and to not release any utilities or make any changes in the utilities for filing of the return of income under section 139 which would not allow any assessee to raise any claim, could not be granted unless there was a demand for justice which had been rejected or a failure on the part of the Department to exercise its duty under the Act. The court should grant no relief in such broad and general terms because the ramifications would be unclear.

viii) The Department was directed to modify the utilities for filing of the return of income u/s. 139 of the Act immediately, thereby allowing the assessees to make a claim of rebate under section 87A of the Act read with the proviso to section 87A , in their return of income for the assessment year 2024-25 and subsequent years including revised returns to be filed u/s. 139(5).”

BCAJ Admin

1. Principle CIT vs. Hespera Reality Pvt. Ltd

[2025] 472 ITR 630 (Del.)

A. Y. 2015-16

Date of order: 24^th December

Ss.10(38) and 115JB of ITA 1961

Exemption u/s. 10(38) — Long-term capital gains — Book profits — Minimum alternate tax — Amendments in provisions of sections 10 and 115JB — Commissioner (Appeals) and Tribunal not erroneous in allowing exemption u/s. 10(38) on long-term capital gains from sale of shares of amalgamating companies with assessee:

During the F.Y. 2014-15 relevant to the A.Y. 2015-16, five companies which held shares of the entity IBHFL merged with the assessee and three of these companies sold their shares. Since the said amalgamating companies were merged with the assessee with effect from August 1, 2014, the income earned from the transaction of sale of IBHFL shares were assessed in the hands of the assessee. The Assessing Officer was of the view that the amount of long-term capital gains was required to be added to the book profits u/s. 115JB and that the amount was not entitled to exemption u/s. 10(38).

The Commissioner (Appeals) held that the entire amount of long-term capital gains was not liable to be included as income chargeable to tax u/s. 10(38) and accordingly, deleted the disallowance but upheld the Assessing Officer’s decision regarding the computation of book profits for the purpose of determination of minimum alternate tax u/s. 115JB. On the question, whether the long-term capital gains that arose from the sale of investments were exempted u/s. 10(38), the Tribunal concurred with the decision of the Commissioner (Appeals) and rejected the appeal of the Department.

Delhi High Court dismissed the further appeal by the Department and held as under:

“i) The proviso to section 10(38) of the Income-tax Act, 1961 was introduced by virtue of the Finance Act, 2006 ([2006] 282 ITR (St.) 14). The inclusion of the proviso was corresponding to the amendments to Explanation 1 of section 115JB. By virtue of the Finance Act, 2006, the Explanation to section 115JB was amended and expenditure incurred in respect of the income exempt u/s. 10, with the exceptions of section 10(38) was excluded for the purposes of calculation of book profits and minimum alternate tax under section 115JB. In other words, the expenditure incurred for earning such income as was exempt from taxation by virtue of section 10(38) was required to be accounted for as expenditure for determining the book profits. Correspondingly, income u/s. 10(38) was also included as a part of the book profits but other incomes covered u/s. 10 were excluded.

ii) The proviso to section 10(38) was added by virtue of the Finance Act, 2006 to abundantly clarify that the income from capital gains on certain assets, which are excluded from the income u/s. 10(38) would be included in computing book profits u/s. 115JB. The proviso to section 10(38) cannot be read in the reverse to mean that if the gains are not included as book profits u/s. 115JB they are liable to be included as income for the purposes of assessment to tax under the normal provisions, notwithstanding that the gains are required to be excluded from income chargeable to tax u/s. 10(38).

iii) There was no fault with the decision of the Commissioner (Appeals) and the Tribunal, in rejecting the Department’s contention and holding that the assessee was entitled to exemption u/s. 10(38) of the long-term capital gains on account of sale of shares by the amalgamating companies, which was denied by the Assessing Officer.”

BCAJ Admin

96 Kamal VarandmalGalani vs. PCIT

[2024] 460 ITR 380 (Bom)

A.Y.: 2021–22

Date of Order: 20^th April, 2023

S 127 of ITA 1961

Transfer of case — Transfer from one AO to another subordinate to different higher authority — Condition precedent — Agreement between two higher authorities — Assessee should be given adequate opportunity to be heard — Mere speculation that assessee was connected to group of companies against whom search proceedings undertaken and that cases had to be centralized — Order of transfer not valid.

The assessee had been filing return of income for the past 22 years in Mumbai. The assessee was in receipt of show cause notice dated 24^th June, 2022 issued by the Principal Commissioner of Income-tax — 19 proposing to transfer the assessment jurisdiction to Deputy Commissioner of Income-tax — Central Circle, Jaipur to enable coordinated assessment with that of Veto Group on whom search proceedings were conducted u/s 132 of the Act. As per the show cause notice, the Principal Commissioner of Income-tax (Central) — Rajasthan had proposed for centralization of the case of the assessee with Veto Group at Jaipur, and therefore, the assessee was asked to file submissions. The assessee filed objections against the aforesaid transfer of jurisdiction on the grounds that there was no search conducted at the premises of the assessee. Only a survey was conducted u/s 133A that too in the case of one company LHPL in which the assessee was a director. There was no material found during the search conducted at Veto group which could be related to the assessee. Similarly, there was no incriminating material found in the course of survey at LHPL which could relate the assessee or even LHPL to Veto Group. Lastly, the show cause notice did not refer to any material collected by the Department against the assessee on the basis of which transfer of jurisdiction was proposed.

The objections of the assessee were rejected on the ground that the assessee was the director of LHPL which was proposed to be centralized with Jaipur jurisdiction and further that the assessee was a key person of the Veto Group. During the course of search / survey at various entities of the group, incriminating documents and data were found / seized / impounded which may relate to the assessee as well as other ssesses of the group. However, what is incriminating material was nowhere specified neither in the show cause notice nor in the order.

The Bombay High Court allowed the writ petition filed by the assessee and held as follows:

“i) The Instructions of the CBDT dated 17th September, 2008 make it clear that where an order of transfer is proposed for centralisation of cases, while sending a proposal for centralisation, reasons have to be reflected including the relationship of the assessee with the main persons of the group.

ii) The order passed u/s 127(2) of the Act did not reflect why it was necessary to transfer the jurisdiction from the Deputy Commissioner, Mumbai to Deputy Commissioner, Jaipur. None of the issues raised by the assessee had been dealt with either in the order disposing of the objections raised by the assessee much less had they been reflected in the order u/s 127(2) of the Act. The transfer of assessment jurisdiction from Mumbai to Jaipur would certainly cause inconvenience and hardship to the assessee both in terms of money, time and resources, and therefore, in the absence of the requisite material or reasons as the basis the order would be nothing but an arbitrary exercise of power and therefore liable to be set aside.”

BCAJ Admin

95 TATA-ALDESA JVvs. UOI

[2024] 460 ITR 302 (Telangana)

A.Y.: 2014–15

Date of Order: 12^th June, 2023

Ss. 80IA, 263 and 264 of ITA 1961

Revision — Powers of Commissioner — Special deduction — Claim to deduction u/s 80-IA not made in return of income and assessment order passed — Principal Commissioner or Commissioner competent to consider claim for deduction — Matter remanded.

For the A.Y. 2014–15, the Assessing Officer passed an order u/s 143(3) of the Income-tax Act, 1961. Thereafter, the assessee filed an application before the Principal Commissioner u/s 264 in which it submitted that it had commenced its business operations during the previous year 2013–14, and accordingly, the A.Y. 2014–15 was the first year under assessment and that though it was entitled to claim deduction u/s 80-IA because of a bona fide error, it did not claim it either at the time of filing the return of income or during the assessment proceeding. The assessee also sought condonation of delay of 52 days. The Principal Commissioner condoned the delay and observed that the assessee did not opt to make the claim to deduction u/s 80-IA and that in the subsequent A.Y. 2015–16 also, the assessee did not make such claim before the Assessing Officer. He opined that the assessee chose not to claim deduction u/s 80-IA and declined to interfere u/s 264 in the order of the Assessing Officer.

The Telangana High Court allowed the writ petition filed by the assessee and held as under:

“i) There is a fundamental difference between sections 263 and 264 of the Income-tax Act, 1961. For invoking the power u/s 263, the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner should be of the opinion that an order passed by the Assessing Officer or Transfer Pricing Officer is erroneous inasmuch as the order is prejudicial to the interests of the Revenue. In that event, he may call for the record of the proceedings before the Assessing Officer or the Transfer Pricing Officer and after making inquiry, may pass such an order as section 263 contemplates. But there is no such limitation in section 264 under which the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may either of his own motion or on an application by the assessee for revision, call for the records of any proceeding relatable to an order other than an order to which section 263 applies and after making due inquiry, he may pass such order thereon as he thinks fit; the only caveat being that such order should not be prejudicial to the assessee. It is not confined to legality or validity of an order passed by the Assessing Officer or a claim made and disallowed or a claim not put forth by the assessee.

ii) There was no limitation on the exercise of power u/s 264 by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. The order rejecting the assessee’s application was set aside. The matter was remanded to the Principal Commissioner for reconsideration of the revision application filed by the assessee u/s 264 on the merits after giving due opportunity of hearing to both the sides.”

BCAJ Admin

94 Ratan Industries Ltd. vs. Principal CIT

[2024] 460 ITR 504 (All.)

A.Y.: 2012–13

Date of Order: 11^th May, 2023

S. 264 of ITA 1961

Revision — Writ — Powers of Commissioner — Commissioner cannot consider application where appeal lies or is pending — Prohibition does not apply where writ petition has been filed.

The assessment proceedings for the A.Y. 2012–13 were completed. Against the assessment order, the assessee filed revision application u/s 264 of the Income-tax Act, 1961. The Principal Commissioner rejected the application on the grounds that as the writ petition, filed by the assessee against the order passed initiating reassessment proceedings u/s 143(3)/147 of the Act of 1961 on 30^th March, 2019, is pending consideration, in view of the provisions of section 264(4)(a) of the Act, no order can be passed u/s 264 of the Income-tax Act of 1961.

The Allahabad High Court allowed the writ petition filed by the assessee and held as follows:

“i) From a perusal of section 264(4)(a) of the Income-tax Act, 1961, it is clear that the Principal Commissioner or Commissioner shall not revise any order which is under challenge in a case where an appeal against the order lies to the Deputy Commissioner (Appeals) or to the Commissioner (Appeals) or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or, in the case of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal, the assessee has not waived his right of appeal. The pendency of a writ petition before the High Court would not amount to pendency of any appeal before any authority.

ii) Once the proceedings were initiated for reassessment by the respondent and the competent authority proceeded to complete the assessment on 31^st December, 2019, no occasion arose as to any matter being pending before the High Court as the only challenge before the writ court was for initiation of proceedings u/s 143(3) read with section 147 of the Act. Once the reassessment was made and the proceedings were completed, the writ petition had practically become infructuous. The ground taken by the Principal Commissioner for rejection of the application did not hold any ground as the writ petition is not an appeal according to section 264(4)(a) of the Act. The rejection of the application for revision was not valid.

iii) In view of the above discussions, I find that the order dated 30^th March, 2022, passed by the Principal Commissioner of Income-tax-I, Agra, is unsustainable in the eyes of law and, as such, the same is hereby quashed and set aside. Respondent No. 1 is hereby directed to continue with the revisional proceedings initiated by the assessee-petitioner u/s 264 of the Act and shall decide the same expeditiously, in accordance with law.”

BCAJ Admin

93 DLF Homes Panchkula Pvt. Ltd. vs. JCIT(OSD)

[2023] 459 ITR 773 (Del.)

Date of Order: 24^th March, 2023

Ss. 194I read with 194C of the IT Act

Rent — TDS — Agreement with State Government for development — External Development Charges (EDC) paid under Agreement with State Government — Not in the nature of rent — No tax deductible on such charges.

The assessee was engaged in the business of developing real estate. The assessee made application to Director General, Town and Country Planning for grant of license for setting up an IT Park as well as a Group Housing Colony. As per the rules of Haryana Development and Regulation of Urban Areas Rules, 1976 (HUDA Rules), the assessee entered into agreement with the State Government of Haryana for setting up the IT Park and Group Housing Colony. The agreement required the assessee to pay proportionate development charges as and when required and as determined by the Director General.

The Assessing Officer held that the external development charges were in the nature of “rent” and, therefore, tax was liable to be deducted at source under section 194-I of the Act at the rate of 10 per cent. The Assessing Officer quantified the demand.

The Delhi High Court allowed the writ petition filed by the assessee and held as follows:

“i) The question as to the nature of external development charges payment was one of the issues that was required to be addressed by the Assessing Officer. He had concluded that the payment was ‘rent’ as it was in the nature of an arrangement to use land. It was not open to the Department to now contend that external development charges were payment made to a contractor under a contract and not ‘rent’ under an arrangement to use land.

ii) The Assessing Officer had held that tax was liable to be deducted at source u/s 194-I of the Act, and he had also proceeded to analyse the section and hold that external development charges were in the nature of rent. He had, in addition, also applied the rate of 10 per cent for assessing the assessee’s liability.

iii) The approach of the Revenue was flawed. The contention that the findings of the Assessing Officer regarding the nature of the external development charges as well as at the provisions referred by him for determining the assessee’s liability were not material was erroneous. The orders passed by the Assessing Officer raising a demand u/s 201(1) and (1A) of the Act were liable to be quashed.”

BCAJ Admin

92 Ganesh Dass Khanna vs. ITO

[2024] 460 ITR 546 (Del.)

A.Ys.: 2016–17 and 2017–18

Date of Order: 10^th November, 2023

Ss. 147, 148, 148A(b), 148A(d), 149(1)(a) and 149(1)(b) of ITA 1961

Reassessment — Notice after three years — Limitation — Change in law — Effect of decision of Supreme Court in Ashish Agarwal — Conditions prescribed under amended provisions of section 149(1)(d) for extended period of limitation — Notices issued beyond limitation period stipulated under amended provisions of section 149(1)(a) not satisfying prescribed conditions — Barred by limitation.

Reassessment — Notice after three years — Limitation — CBDT Instructions dated 11^th May, 2022 — Validity — Instruction vague about “original date when such notices were to be issued” — Instruction to the extent it propounded “travel back in time” theory unsustainable.

A bunch of petitions involving the A.Y.s 2016–17 and 2017–18 were before the Delhi High Court where the common issue to be decided by the Hon’ble High Court was whether the notices issued u/s 148 of the Act were maintainable having regard to clauses (a) and (b) of section 149(1). In other words, where the alleged escaped income is below the threshold of R50 lakhs, the period of limitation of three years as prescribed u/s 149(1)(a) will be applicable.

Owing to the COVID-19 pandemic, Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act was enacted where the due dates / time limit / limitation were extended. Under the TOLA, the end date for proceedings and compliances referred to in section 3(1) of the said Act (which included the compliance regarding the issue of notice u/s 148) was 31^st March, 2021. The Finance Act was amended in 2021 whereby significant amendments were made to the provisions relating to reopening of assessment. Sections 147 to 151 were substituted and new provisions u/s 148A and 151 were also introduced. The controversy arose when CBDT issued two notifications, i.e., Notification 20 of 2021, whereby the period of limitation as per provisions of section 149 was extended from 31^st March, 2021 to 30^th April, 2021 and Notification No. 38 of 2021 further extended the period of limitation to 30^th June, 2021. An Explanation was added in both the Notifications which provided that provisions of sections 148, 149 and 151 as existed prior to amendment by Finance Act 2021 shall apply. In other words, the Notifications provided that the old provisions would apply even when the amended provisions were in force. Thus, the Departmentissued notices under the unamended provisions of section 148.

Several petitions were filed before the High Court challenging the notice on broadly two grounds, i.e., the notices could not have been issued under the old provisions when new provisions were in force and the notices were barred by limitation as per the amended provisions of section 149. The High Courts quashed the notices which were issued under the old provisions based on the Explanation contained in the aforesaid Notifications. The Union of India challenged the decision of the High Court before the Supreme Court and the Hon’ble Supreme Court, vide its judgment in Ashsish Agarwal’s case reported in 444 ITR 1 (SC) held that as a one-time measure the notices issued u/s 148 of the Act be treated as notice issued u/s 148A(b) of the amended provisions.

Pursuant to the decision of the Supreme Court, the CBDT issued Instruction dated 11^th May, 2022 in compliance with the directions of the Supreme Court in Ashish Agarwal’s case. Accordingly, a second round of notices / communications were issued by the Assessing Officers. The assessees filed their objections once again against the notices.

Amongst the various objections taken, one of the objections was that the time limit prescribed u/s 149(1)(a) had expired and given the fact that the income chargeable to tax which had allegedly escaped assessment amounted to less than ₹50 lakhs, the revenue could not take recourse to the extended limitation period provided in clause (b) of sub-section (1) of section 149 of the 1961 Act. The Department rejected this objection of the assessee and proceeded to pass order u/s 148A(d) of the Act holding it to be fit case for issue of notice u/s 148 and thereby, notices were issued u/s 148 of the Act. It is this second notice issued u/s 148 which is now the subject matter of challenge before the High Court in the bunch of petitions.

The Delhi High Court allowed the petitions and held as under:

“i) Section 149(1) of the Income-tax Act, 1961 as amended by the Finance Act, 2021 mandates that no notice u/s 148 for reopening the assessment u/s 147 would be issued for the relevant assessment year after a period of three years has elapsed from the end of the relevant assessment year. The Assessing Officer can invoke the extended limitation period if the conditions precedent prescribed in clause (b) of sub-section (1) of the amended section 149 are fulfilled. Under clause (b) of sub-section (1) of section 149 one of the conditions for invoking the extended period up to ten years is that income chargeable to tax which has escaped assessment amounts to, or is likely to amount to, ₹50 lakhs or more for the assessment year in issue. Therefore, after the coming into force of the Finance Act, 2021, in cases where, for the relevant assessment year, the alleged escaped income is less than ₹50 lakhs, notice u/s 148 could only be issued for commencement of reassessment proceedings within the limitation period provided in clause (a) of section 149(1) as amended. If proceedings are wrongly initiated, estoppel, waiver or res judicata principles cannot apply in such situations.

ii) The time limit for reopening assessments under the new regime introduced by the Finance Act, 2021 was reduced from six years to three years and only in respect of ‘serious tax evasion cases’, that too, where evidence of concealment of income of R50 lakhs or more in a given period was found, has the period for reopening the assessment been extended to ten years. In order to ensure that utmost care is taken before invoking the extended period of limitation, approval should be obtained from the Principal Chief Commissioner at the highest hierarchical level of the Department. Where escapement of income is below ₹50 lakhs, the normal period of limitation, i.e., three years would apply.

iii) In UOI vs. Ashish Agarwal [2022] 444 ITR 1 (SC); [2023] 1 SCC 617, the Supreme Court held that it would be open to the Department to advance submissions based on the provisions as amended by the 2021 Act and those that might otherwise be available in law. Since the Supreme Court, in no uncertain terms, ruled that the judgments of the various High Courts, which included the decision in Mon Mohan Kohli vs. Asst. CIT [2021] SCC OnLine Del 5250; [2022] 444 ITR 207 (Delhi), stood “modified or substituted” to the extent indicated in the directions issued by the court, it would follow that all rights and contentions would be available to the assessees, notwithstanding any observations made in that judgment which curtailed the defences available to the assessees u/s 149.

iv) The law declared by the Supreme Court, under article 141 of the Constitution of India, is binding on every authority, including the High Court, which would necessarily have to be given effect. The Supreme Court’s directions issued under article 142 are no different.

v) The Supreme Court’s directions issued u/s 142 would show that the court noted that the power of reassessment which existed before 31^st March, 2021 continued to exist till 30th June, 2021, with alteration in procedure brought about upon the enactment and enforcement of the 2021 Act. The Supreme Court, in no uncertain terms, declared Explanation A(a)(ii)/A(b) of the Notifications dated 31st March, 2021 and 27^th April, 2021, ultra vires the parent statute, i.e., the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. These Explanations sought to impose the un-amended provisions of sections 148, 149 and 151 of the 1961 Act, although the substituted provisions were in force. It specifically observed that the Legislature was aware of the situation when it enacted the 2021 Act. Its observations made it clear that the amended section 149 continued to operate despite attempts to the contrary made by the introduction of the Explanations in the notifications dated 31^st March, 2021 and 27^th April, 2021.

vi) There was no power invested under the 2020 Act, and that too through notifications, to amend the statute, which had the imprimatur of the Legislature and since, with effect from 1^st April, 2021, when the 2021 Act came into force, the Notifications dated 31^st March, 2021 and 27^th April, 2021, which were sought to be portrayed by the Department as extending the period of limitation, were contrary to the provisions of section 149(1)(a) of the 1961 Act, they lost their legal efficacy. The extension of the end date for completion of proceedings and compliances, a power which was conferred on the Central Government u/s 3(1) of the 2021 Act, could not be construed as one which could extend the period of limitation provided u/s 149(1)(a) of the 1961 Act.

vii) Section 149(1)(a) applied to the A.Ys. 2016–17 and 2017–18. The third proviso only excluded the timeframe obtaining between the date when the notice u/s 148A(b) was issued and the date by which the assessee filed its response within the time and extended time provided in the notices in question. Therefore, the date could not be shifted beyond the date when the original notice under the unamended section 148 was issued, which was treated as notice u/s 148A(b) of the 1961 Act. Concededly, these notices were issued between 1^st April, 2021 and 30^th June, 2021, by which time the limitation prescribed u/s 149(1)(a) had already expired. The fourth proviso had no impact on the outcome of the cases at hand, as it provided for a situation where, after the exclusion of the timeframe referred to in the third proviso, the time available to the Assessing Officer for passing an order u/s 148A(d) was less than seven days. Neither the judgment of the Supreme Court rendered in Ashish Agarwal nor the 2020 Act allowed for any such recourse to the Department, i.e., that extended reassessment notice would ‘travel back in time’ to their original date when such notices were to be issued and thereupon application of the provisions of the amended section 149 of the 1961 Act.

viii) The provisions contained in the Instruction dated 11^th May, 2022, were beyond the powers conferred on the CBDT u/s 119 of the 1961 Act and were ultra vires the amended provisions of section 149(1) of the 1961 Act.

ix) The decision in Ashish Agarwal did not rule on the provisions contained in the 2020 Act or the impact they could have on the reassessment proceedings u/s 147 of the 1961 Act. The 2020 Act conferred no such power on the CBDT. There is no clarity in the Instruction dated 11^th May, 2022 regarding the ‘original date when such notices were to be issued’. The provisions of the Instruction dated 11^th May, 2022 in question are also unsustainable because they are vague. “Certainty” in taxing statutes is one of the ground norms, as ordinarily, they are agnostic to equitable principles.

x) The principle of constructive res judicata was not applicable. The orders passed u/s 148A(d) and the consequent notices issued for the A.Ys. 2016–17 and 2017–18 under the amended provisions of section 148 of the 1961 Act were unsustainable. The references made in paragraphs 6.1 and 6.2(ii) of the Instruction dated 11^th May, 2022 issued by the CBDT to the extent they propounded the ‘travel back in time’ theory, was bad in law.”

BCAJ Admin

91 Principal CIT vs. Minda Sm Technocast Pvt. Ltd.

[2024] 460 ITR 7 (Del.)

A.Y.: 2014–15

Date of Order: 4^th August, 2023

S. 56(2)(via) of ITA 1961: Rule 11UA of IT Rules 1962

Income from other sources — Shares received at price higher than market value — Determination of fair market value — Change in prescribed formula with effect from 1^st April 2018 — Formula that prevails during relevant A.Y. 2014–15 applicable — Application of amended formula as on date of assessment order by AO — Not sustainable.

The assessee purchased 48 per cent of the equity of a company from three entities at a price of ₹5 per share. For the A.Y. 2014–15, the assessee submitted the valuation report of a chartered accountant who had determined the value of the shares at ₹4.96 per share in terms of rule 11UA of the Income-tax Rules, 1962, as applicable in the period in issue, i.e., the A.Y. 2014–15. The Assessing Officer valued the shares at ₹45.72 per share, taking into account rule 11UA of the Rules, as on the date when the order was passed and added the difference to the income of the assessee.

The Commissioner (Appeals) upheld the addition. The Tribunal deleted the addition.

The Delhi High Court upheld the decision of the Tribunal and held as under:

“i) The formula prescribed under rule 11UA of the Income-tax Rules, 1962 required calculation of the fair market value by taking into account, inter alia, the book value of the assets shown in the balance-sheet. This underwent a change with effect from April 1, 2018, which resulted in the fair market value of unquoted shares being calculated by taking into account, inter alia, the value of assets such as immovable property, adopted by ‘any authority of the Government’ for the purposes of payment of stamp duty.

ii) The Assessing Officer had committed an error in applying the formula contained in rule 11UA of the Rules, which was not applicable to the A.Y. 2014-15 in question as on the date of passing the assessment order and the error was continued by the Commissioner (Appeals). The assessee had applied the formula prescribed in rule 11UA which was applicable for the A.Y. 2014-15. The error was corrected by the Tribunal and therefore, there was no reason to interfere in its order.”

BCAJ Admin

90 Chand Bihari Agrawal vs. CIT

[2024] 460 ITR 270 (Patna)

Date of Order: 25^th July, 2023

Ss. 143(2), 158BC and 292BB of ITA 1961

Block assessment — Procedure — Notice u/s 143(2) — Condition precedent for block assessment — Failure to issue notice u/s 143(2) — Not a curable defect u/s 292BB.

A search was conducted at the premises of the assessee. Subsequently, a notice u/s 158BC was issued on 10^th December, 2003 directing the assessee to file the return within a period of one month. Thereafter, a notice u/s 142(1) was issued on 9^th November, 2004, wherein the assessee was required to file a return in response to the notice issued u/s 158BC issued earlier. The assessee filed the return on 22^nd November, 2004. Assessment was made and order was passed u/s 158BC. The assessment was completed without issuing any notice u/s 143(2) of the Act.

The assessee’s appeals before the CIT(A) as well as the Tribunal were dismissed. The Tribunal observed that the return filed by the assessee was non-est as the same was filed beyond the outer limit of 45 days u/s 158BC, and therefore, the Assessing Officer was entitled to proceed for assessment even without the issuance of notice u/s 143(2) of the Act. Further, the Tribunal held that in the event that assessment is defective, the defect was cured by operation of section 292BB. Though section 292BB was introduced later, the Tribunal held that it was merely a procedural clarification, and since the assessee co-operated in the assessment, 292BB would apply.

The Patna High Court allowed the appeal filed by the assessee and held as follows:

“i) Though block assessment under Chapter XIV-B of the Act is a complete code in itself, the procedure under Chapter XIV for regular assessment in so far as it is applicable to block assessments stands incorporated under clause (b) of section 158BC as Circular No. 717, dated August 14, 1995 ([1995] 215 ITR (St.) 70, 98) clarifies the requirement of law in respect of service of notice u/ss. 142, 143(2) and 143(3) of the Act. It is declared that “even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of section 158BC, the provisions of section 142 and sub-sections (2) and (3) of section 143 are applicable and no assessment could be made without issuing notice u/s 143(2) of the Act.

ii) Section 292BB only speaks of a notice being deemed to be valid in certain circumstances, when the assessee has appeared in any proceeding and co-operated in any enquiry relating to assessment or reassessment. It does not take in the circumstance of a complete absence of notice; which does not stand cured u/s 292BB, especially in the teeth of such notice being found to be mandatory under the Act.

iii) The search and seizure was conducted in the residential-cum-business premises of the assessee on February 27, 2003. On the basis of the recovery made, a notice u/s 158BC of the Act was issued on December 9/10, 2003. The assessee was directed to file a return within a period of one month. A further notice u/s 142(1) of the Act was issued on November 9, 2004 wherein again the assessee was required to file a return in response to the notice issued u/s 158BC. The subsequent notice was issued u/s 142(1), to which the assessee responded with a return filed within almost twelve days. The assessment was completed much after, but without issuing a notice u/s 143(2). The assessment completed u/s 158BC without a notice u/s 143(2) could not be sustained and had to be set aside.”

BCAJ Admin

89 Mrs. SitadeviSatyanarayanMalpani& Others vs. ITSC

[2023] 459 ITR 758 (Bom.)

A.Ys.: 1989–90 to 1996–97

Date of Order: 30th June, 2023

S. 244A of ITA 1961

Assessment — Effect of self-assessment — Tax paid on self-assessment entitled to refund and interest on refund.

Pursuant to a search carried out at the premises of the assessee, an application for settlement was filed u/s 254C(1) of the Income-tax Act, 1961, for the A.Ys. 1989–90 to 1996–97. The Application was admitted on 22^nd April, 1998. As per the order, the assessee was required to pay additional tax on the income disclosed. The assessee paid the additional tax and furnished copies of the challans. Pending application, the assessee filed a working of tax and interest for verification and also stated that the assessee shall pay the shortfall, if any. In response, the assessee received communication stating that a sum of ₹55,03,494 was payable by the assessee on account of tax and interest. In response, the assessee submitted that the payments made by the assessee had not been considered and thereby requested that the calculations be revised. During the course of hearing before the Settlement Commission, the assessee furnished the copies of challans. The assessee was informed that the balance amount of ₹1,16,511 was payable and to cover the said shortfall, the assessee made payment of ₹1,30,000. On 3^rd August, 2008, an order was passed holding that the application filed by the assessee was not maintainable due to non-compliance of section 245(2D) of the Act and the application was held to have abated u/s 245HA(1)(ii) of the Act.

On writ petition, the assessee contended that the assessee had in fact paid more than the amount he was required to pay on self-assessment. The Settlement Commission contended that credit for such excess tax paid had already been granted to assessee but no interest was payable on the same as excess tax paid was arising out of self-assessment tax paid by assessee which was not eligible for any interest.

The Bombay High Court allowed the petition of the assessee and held as follows:

“i) Tax paid on self-assessment would fall u/s 244A(1)(b) of the Income-tax Act, 1961, i.e., the residual clause covering refunds of amount not falling u/s 244A(1) of the Act and as confirmed by a circular issued by the CBDT (Circular No. 549 dated October 31, 1989 * [1990] 182 ITR (St.) 1), the payment should be considered to bea tax and interest thereon would be payable to the assessee.

ii) It was clear that the tax payable was only ₹19,52,372 whereas the total tax paid was ₹20,06,280 which would leave an excess amount of ₹53,098 as paid. It was not denied that there was an excess tax paid of ₹53,098 but the stand of the Department was that credit for such excess tax paid had already been granted to the assessee but no interest was payable thereon as the excess tax paid arose out of self-assessment tax paid by the assessee which was not eligible for any interest. This was not correct. The assessee had complied with his obligations under the provisions of section 245D of the Act. The order rejecting the application for settlement of cases was not valid.

iii) In the circumstances, we are quashing and setting aside the impugned order dated January 3, 2008.We direct the matter to be placed before the InterimBoard for Settlement constituted u/s 245AA for consideration. Since the matter is old, the petitioners shall file a copy of the settlement application that was originally filed on April 27, 1997 before the Board within two weeks of this order being uploaded. The photocopy shall be certified as true copy by the advocates/chartered accountant of the petitioners. The Interim Board shall dispose of the application on merits in accordancewith law.”

BCAJ Admin