Income Tax Act, 1961 - Sections 132(3), 275A - Indian Penal Code, 1860 - Sections 34, 37, 120B, 201, 206, 217, 406, 409, 420, 462 - Code of Criminal Procedure, 1973 - Section 482 - The assessee challenged the registration of an FIR (Case No. 549 of 2021) by the Gandhi Maidan Police Station, Patna, for alleged violations of a prohibitory order issued under Section 132(3) of the Income Tax Act during a search operation. The FIR alleged that officials at HDFC’s Exhibition Road Branch allowed Smt. Sunita Khemka to operate a bank locker in violation of the prohibitory order dated 5th October 2021, despite a subsequent revocation order dated 1st November 2021 only lifting restrictions on specific bank accounts, not the locker. The appellant-bank's officials claimed an inadvertent misinterpretation of the revocation order. The High Court dismissed the appellant's plea to quash the FIR, leading to this appeal before the Supreme Court - Whether the FIR disclosed the necessary ingredients for the offenses under Sections 406, 409, 420, and other provisions of the IPC against the bank officials - Whether the High Court erred in dismissing the petition under Section 482 Cr.P.C. for quashing the FIR without assessing the lack of mens rea or criminal intent by the bank officials - Whether the continuation of criminal proceedings constituted an abuse of process, causing undue hardship to the appellant-bank – HELD - The FIR did not disclose any prima facie evidence of fraudulent intent or dishonest inducement by the bank officials. The Court emphasized that the officials’ actions stemmed from a bona fide misinterpretation of the revocation order concerning the bank accounts and not the locker, thereby lacking the requisite mens rea for offenses under Sections 406, 409, 420 IPC - The Court noted that the essential elements of criminal breach of trust under Sections 406 and 409 IPC, which include entrustment and dishonest misappropriation of property, were not met. There was no allegation or evidence that the bank officials converted any property for their own use or caused wrongful loss to the complainant - Relying on the precedent set in State of Haryana v. Bhajan Lal and subsequent judgments, the Court emphasized that continuation of proceedings without a prima facie case constitutes abuse of legal process. The Supreme Court found that the High Court had failed to perform its duty of evaluating the FIR's contents under Section 482 Cr.P.C., thus leading to an undue burden on the appellant-bank - The Supreme Court allowed the appeal, quashed the FIR (Case No. 549 of 2021) registered against the bank officials, and set aside the High Court's order, holding that the continuation of proceedings would cause undue hardship and lacked the legal basis for prosecution
Income Tax Act, 1961 – Sections 28, 37(1), 143(3), 263 - The issue revolves around the treatment of broken period interest paid by banks on the purchase of government securities, categorized under RBI guidelines as Held to Maturity (HTM), Available for Sale (AFS), and Held for Trading (HFT). Banks consistently claimed deductions on broken period interest as revenue expenditure, treating securities as stock-in-trade. The Revenue disallowed the deductions, relying on the Supreme Court's decision in Vijaya Bank Ltd. v. Addl. CIT, where broken period interest was treated as capital expenditure - Whether broken period interest paid on the purchase of securities held as stock-in-trade should be treated as revenue expenditure or capital expenditure for tax purposes - HELD - distinguishing the present case from Vijaya Bank Ltd., ruled that when securities are held as stock-in-trade, particularly under the AFS and HFT categories, broken period interest should be treated as a revenue expenditure under Section 28. The Court noted that taxing the interest as capital expenditure would be revenue-neutral since the acquisition cost would be deducted from the sale proceeds when the securities are sold. It reaffirmed that interest on HTM securities might be treated as capital expenditure only if they are held as long-term investments. The decision was based on precedents such as American Express International Banking Corporation and CIT v. Cocanada Radhaswami Bank Ltd., where interest on securities treated as stock-in-trade was deductible as a business expense - The Court allowed the appeals in favor of the appellant banks, restoring the Tribunal's decision to permit the deduction of broken period interest as revenue expenditure for AFS and HFT securities. However, the Court clarified that securities in the HTM category would be treated based on whether they are held as investments or stock-in-trade
Income Tax - Sections 147-151 of the Income Tax Act, 1961 - Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) - Finance Act, 2021 - The appeals before the Supreme Court involve the reassessment procedure under Sections 147 to 151 of the Income Tax Act. The reassessment notices were issued after the Finance Act, 2021, which overhauled the reassessment provisions. The respondents argued that the reassessment notices issued between 1 April 2021 and 30 June 2021 under the old regime were invalid due to the amended reassessment provisions, while the Revenue contended that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), extended the timeline for issuing notices during the COVID-19 pandemic - Whether TOLA and its notifications apply to reassessment notices issued after 1 April 2021 - Whether the reassessment notices issued under the old regime between July and September 2022 are valid under the new reassessment provisions introduced by the Finance Act, 2021 – HELD - The Finance Act, 2021, introduced substantial changes in the reassessment scheme, replacing the old regime with a new one. The Court noted that while TOLA provided relaxation of time limits for actions to be taken during the pandemic, it did not extend the life of the old regime for reassessments initiated after 1 April 2021. Thus, any reassessment notices issued after that date must comply with the new regime - The Court also held that the reassessment notices issued after 1 April 2021 under the old regime, despite the amendments in the Finance Act, should be deemed to have been issued under Section 148A(b) of the new regime. The notices were therefore converted into show-cause notices under the new provisions. Furthermore, reassessment notices issued after July 2022 without appropriate sanctions were deemed invalid due to non-compliance with the new procedural requirements - The reassessment notices issued under the old regime after 1 April 2021 were deemed invalid. The Court directed that any such notices be treated as show-cause notices under Section 148A(b) of the new regime, and reassessment actions must comply with the amended provisions introduced by the Finance Act, 2021
Income Tax Act, 1961 - Section 139(5) & 254 - The assessee filed its return of income for AY 1989-90 and subsequently filed two revised returns, the second of which was filed on 29th October 1991, after the statutory period allowed under Section 139(5). The Assessing Officer ignored the revised return filed after the deadline, leading to an appeal by the assessee. The CIT (Appeals) upheld the Assessing Officer's decision, stating that the revised return was barred by limitation. The Tribunal, however, directed the Assessing Officer to reconsider the assessee’s claim for deduction of deferred revenue expenditure, despite the revised return being time-barred. The High Court set aside the Tribunal’s order, ruling that the claim could not be considered once the revised return was time-barred - Whether the Assessing Officer or the Tribunal has the jurisdiction to consider a claim made in a revised return that was filed after the time limit prescribed under Section 139(5) had expired – HELD - The Tribunal did not exercise its powers under Section 254 to consider the appellant’s claim directly but wrongly directed the Assessing Officer to do so. It emphasized that once a revised return is filed beyond the time limit prescribed under Section 139(5), the Assessing Officer has no jurisdiction to entertain such a claim. The Court further clarified that the power to consider fresh claims lies with the Tribunal under Section 254, not with the Assessing Officer, especially when the revised return is time-barred. The Court reaffirmed the principles laid down in Goetze (India) Ltd. v. CIT and Wipro Ltd. v. CIT, asserting that a revised return filed after the statutory deadline cannot form the basis for new claims - The Supreme Court upheld the High Court's decision and dismissed the appeal, ruling that the Assessing Officer had no jurisdiction to consider the claim made in the revised return filed after the statutory period had expired
Income Tax Act, 1961 – Applicability of provisions of Section 206C of the Income Tax Act - Whether the liquor vendors (contractors) who bought the vending rights from the appellant on auction, can be termed as “buyer” within the meaning of Explanation(a) to Section 206C of the Income Tax Act or excluded from the said definition of “buyer” as per clause (iii) of Explanation (a) to Section 206C of the Act - Revenue of the view that the appellant is a “seller” and the liquor vendors are “buyers” in terms of Section 206C of the Income Tax Act and hence the appellant was under a legal obligation to collect income tax at source from the liquor vendors (contractors) – HELD – though show cause notice was issued to the assessee to which reply was also filed, the same would not be adequate having regard to the consequences that such an order passed under Section 206C(6) of the Income Tax Act would entail. Even though the statute may be silent regarding notice and hearing, the court would read into such provision the inherent requirement of notice and hearing before a prejudicial order is passed. Therefore, before an order is passed under Section 206C of the Income Tax Act, it is incumbent upon the assessing officer to put the person concerned to notice and afford him an adequate and reasonable opportunity of hearing, including a personal hearing - Section 206C of the Income Tax Act is not applicable in respect of Respondent and that the liquor vendors (contractors) who bought the vending rights from the appellant on auction cannot be termed as “buyers” within the meaning of Explanation(a) to Section 206C of the Income Tax Act, 1961 - the High Court was not justified in dismissing the writ petitions and consequently, the writ appeal challenging the orders - Civil Appeal stands allowed
Income Tax Act, 1961 – Section 147 and 148 - issuance of notice under Section 148 - Reassessment under Section 147 of the IT Act, 1961 - Whether reassessment notice can be issued on the basis of an evidence which itself was held to be not reliable – Revenue case reassessment was valid because of the appellant’s purported inability to provide full disclosure, while the appellant-assessee argues that assessments were finished in accordance with Section 143(3) based on revealed significant facts – HELD – Once the primary facts are disclosed by the assessee, the burden shifts onto the assessing officer. It is not the case of the revenue that the assessee had made a false declaration – the assessment order under Section 143(3) is preceded by notice, enquiry and hearing under Section 142(1), (2) and (3) as well as under Section 143(2). If that be the position and when the assessee had not made any false declaration, it was nothing but a subsequent subjective analysis of the assessing officer that income of the assessee for the three assessment years was much higher than what was assessed and therefore, had escaped assessment. This is nothing but a mere change of opinion which cannot be a ground for reopening of assessment – Further, return filed without the regular balance sheet and profit and loss account may be a defective one but certainly not invalid. A defective return cannot be regarded as an invalid return. The assessing officer has the discretion to intimate the assessee about the defect(s) and it is only when the defect(s) are not rectified within the specified period that the assessing officer may treat the return as an invalid return - Ascertaining the defects and intimating the same to the assessee for rectification, are within the realm of discretion of the assessing officer. It is for him to exercise the discretion. The burden is on the assessing officer. If he does not exercise the discretion, the return of income cannot be construed as a defective return. In the present case, in none of the three assessment years, the assessing officer had issued any declaration that the returns were defective - the Tribunal was justified in coming to the conclusion that the reassessments for the three assessment years under consideration were not justified. The High Court has erred in reversing such findings of the Tribunal - the civil appeals filed by the assessee are allowed