Income Tax Act, 1961 – Sections 56(2)(vii)(b)(ii), 50C and 264 - The petitioners purchased a property for Rs. 72,00,000, while the stamp duty was paid based on a guideline value of Rs. 97,69,000. During scrutiny, the Assessing Officer (AO) added the differential amount of Rs. 25,69,000 to the petitioners' income under Section 56(2)(vii)(b)(ii), treating it as income from other sources. The AO did not refer the property valuation to the Valuation Officer, and the petitioners later filed revision petitions under Section 264, which were rejected by the Principal Commissioner - Whether the AO erred in not referring the valuation of the property to the Valuation Officer under Section 50C(2) - Whether the addition under Section 56(2)(vii)(b)(ii) was justified without a proper valuation - Whether the rejection of revision petitions under Section 264 was valid despite the petitioners not disputing the addition during the assessment - HELD - Under the first proviso to Section 56(2)(vii)(c), a buyer of immovable property can dispute the valuation adopted by the Stamp Valuation Authority. In such cases, the AO is required to refer the valuation to the Valuation Officer under Section 50C(2). The AO’s failure to do so rendered the assessment procedurally defective - The Court observed that merely relying on the stamp duty guideline value without obtaining an independent valuation undermines the principles of fairness and accuracy in taxation - The Court ruled that the rejection of the revision petitions under Section 264 was unsustainable, as procedural lapses in the assessment cannot be justified merely on the basis that the petitioners did not contest the addition at the assessment stage - The impugned orders under Section 264 were quashed. The case was remitted to the AO with instructions to refer the valuation dispute to the Valuation Officer as per the provisions of Section 50C(2) and reassess the case in accordance with the law. The AO was directed to complete the exercise within six months. The writ petitions were allowed with no costs
Income Tax Act, 1961 – Sections 56 and 57(iii) – The assessee, a joint venture for securing coal supply, received funds from promoters for acquiring an overseas coal mine. These funds, temporarily kept in short-term fixed deposits, generated interest income. The acquisition plan was abandoned, and the funds were refunded along with interest. The AO treated the interest income as taxable under Section 56, disallowing deductions for interest paid on borrowed funds under Section 57(iii). The CIT(A) upheld the AO's decision, but the ITAT reversed it, holding that the interest income was capital in nature and not taxable under Section 56 - Whether interest income earned on funds temporarily kept in fixed deposits, earmarked for the acquisition of a coal mine, is taxable under Section 56 as "income from other sources" - Whether the interest paid on such funds qualifies for deduction under Section 57(iii) – HELD - The funds were not "surplus" but were called specifically for acquiring a capital asset. The interest earned on temporarily parked funds in fixed deposits was inextricably linked to the capital expenditure - Relying on judicial precedents, including Indian Oil Panipat Power Consortium Ltd. v. ITO and CIT v. Bokaro Steel Ltd., the Court ruled that interest income from such funds is capital in nature and must be adjusted against the capital cost of the asset - The distinction in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT was emphasized, clarifying that the ruling applies only to "surplus" funds not directly connected to capital expenditure - The Court modified the question of law to remove the characterization of funds as "surplus" and ruled in favor of the Assessee. The interest income was held to be capital in nature, not taxable under Section 56, and the Revenue’s appeal was dismissed
Income Tax Act, 1961 – Sections 10(38) and 115JB - The assessee, filed its tax return for AY 2015-16, declaring long-term capital gains (LTCG) of Rs.2,80,62,54,440 from the sale of shares of India Bulls Housing Finance Limited (IBHFL) held by amalgamated entities. The assessee claimed exemption under Section 10(38) of the Act for Rs.2,47,52,73,951 but did not include this amount in its book profits for computing Minimum Alternate Tax (MAT) under Section 115JB. The Assessing Officer (AO) disallowed the exemption and added the amount to the assessee's book profits, asserting that the LTCG must be taxed either under normal provisions or as part of MAT. The CIT(A) allowed the exemption under Section 10(38), but the AO's computation of book profits under Section 115JB was upheld. The ITAT affirmed the CIT(A)’s decision, and the Revenue appealed - Whether the LTCG claimed exempt under Section 10(38) can be excluded from income tax under normal provisions if not included in book profits under Section 115JB - Whether the AO erred in denying the exemption under Section 10(38) on LTCG - HELD - The Court upheld that the LTCG qualified for exemption under Section 10(38) as all statutory conditions were met. The proviso to Section 10(38) merely clarifies that LTCG excluded under normal provisions must still be considered while calculating book profits under Section 115JB but does not preclude the exemption under Section 10(38) itself - The inclusion of LTCG in book profits for MAT purposes is distinct from its exclusion under Section 10(38) for normal provisions. The AO’s conflation of these provisions was incorrect - The Court emphasized that the proviso to Section 10(38) and related amendments in the Finance Act, 2006, were intended to ensure LTCG’s inclusion in MAT calculations without affecting its exemption under normal provisions - The High Court dismissed the Revenue’s appeal, affirming that LTCG exempt under Section 10(38) cannot be taxed under normal provisions merely because it is excluded from book profits under Section 115JB. The decisions of the CIT(A) and ITAT were upheld. No substantial question of law arose
Income Tax Act, 1961 – Sections 32(1), 80IA and 80HHC - The assessee filed a tax appeal challenging the ITAT's ruling on multiple issues for AY 2001-02. These included: (i) the applicability of depreciation under Section 32(1), even if not claimed, for deductions under Chapter VI-A; (ii) the interplay between deductions under Sections 80IA and 80HHC; and (iii) eligibility for a deduction under Section 80IA for a new turbine installation, claimed to be a new industrial undertaking - Whether depreciation under Section 32(1), even if not claimed, must be deducted while computing Chapter VI-A deductions prior to the insertion of Explanation 5 in 2002 - Whether export profits deductible under Section 80HHC can include profits of industrial units eligible under Section 80IA, and if deductions under both can be claimed on the same gross total income - Whether the installation of a new turbine qualifies as a new industrial undertaking eligible for deduction under Section 80IA – HELD - The Court, relying on Supreme Court precedents, held that prior to the introduction of Explanation 5 to Section 32(1) (effective from 01.04.2002), depreciation was optional and could be waived. Therefore, depreciation not claimed by the assessee could not be mandatorily deducted for computing Chapter VI-A deductions. This issue was decided in favor of the assessee - The Court held that deductions under Sections 80HHC and 80IA cannot be allowed simultaneously on the same profits. Section 80IA(9) restricts double deductions, and the calculation of export profits must account for deductions already allowed under Section 80IA. This was decided in favor of the Revenue - The Court ruled that the new turbine installation was an expansion of the existing power plant and not an independent industrial undertaking. It relied on the fact that the turbine relied on a pre-existing boiler and could not independently generate power. Therefore, the deduction under Section 80IA was not allowable. This issue was decided in favor of the Revenue - The High Court ruled partially in favor of the assessee on the issue of depreciation under Section 32(1) but upheld the Revenue's position on deductions under Sections 80HHC and 80IA, denying the claim for a new industrial undertaking
Income Tax Act, 1961 – Sections 147, 148, 151, 36(1)(iii) and 14A – The assessee filed its return of income for AY 2013-14, which was assessed under Section 143(3) with a disallowance of Rs.3.07 crore under Section 14A. Years later, the Assessing Officer (AO) issued a notice under Section 148 to reopen the assessment, citing that Rs.10.49 crore in interest expenses claimed under Section 36(1)(iii) had escaped assessment. The AO alleged that interest-bearing funds were diverted as interest-free advances to related parties. The assessee challenged the reopening, asserting full and true disclosure during the original assessment, lack of tangible material for reopening, and procedural lapses under Section 151 regarding approval - Whether the reopening of assessment after four years, based on the same material available during the original assessment, violated the first proviso to Section 147 - Whether the AO’s reliance on existing records constituted a valid "reason to believe" for reopening the case - Whether reopening the assessment was a change of opinion barred under the law – HELD - Reopening beyond four years was invalid as the AO failed to demonstrate any failure on the part of the assessee to disclose fully and truly all material facts. The reasons for reopening were derived from records already scrutinized during the original assessment under Section 143(3) - The Court found the reopening to be a mere change of opinion, as the AO sought to reassess based on the same material reviewed during the original proceedings. This violated the settled principle that Section 147 does not confer the power to review. Reliance was placed on CIT v. Kelvinator of India Ltd. and other precedents - The petitioner contended that the AO failed to provide a copy of the mandatory approval under Section 151 for reopening, further invalidating the notice under Section 148 - The Court reiterated that reopening requires tangible material leading to income escaping assessment. Since the AO relied on existing records, no new information justified reopening - The Court quashed the reopening notice and related proceedings, declaring them invalid for non-compliance with jurisdictional requirements under Section 147 and procedural lapses under Section 151. The petition was allowed, with no costs imposed
Income Tax Act, 1961 - Section 148, 148A(b), 148A(d) and 151A - The petitioner, challenged the reassessment proceedings initiated under Section 148A(b) and subsequent issuance of notices under Section 148, alleging that income escaped assessment due to disallowed broken period interest (BPI) on securities. The petitioner contended that BPI is an allowable deduction, a matter previously adjudicated in its favor by the Supreme Court in Bank of Rajasthan Ltd. v. CIT and other judgments. The reassessment arose three years after a finalized assessment by NFAC, which initially excluded BPI from taxable income - Whether the reassessment proceedings initiated under Section 148A(b) were legally sustainable - Whether broken period interest on purchase of HTM securities is allowable as a revenue deduction - Whether reassessment proceedings violated principles of judicial discipline in light of binding precedents from the Supreme Court and High Court – HELD - The Court held that reassessment proceedings were without jurisdiction as they contradicted settled principles in Bank of Rajasthan Ltd. v. CIT and CIT v. Citibank N.A., which allow BPI as a revenue deduction. The Assessing Officer's reliance on pending Supreme Court cases, without a stay on binding precedents, was legally untenable - Broken period interest was ruled deductible as per consistent accounting practices and established jurisprudence, reaffirmed by the Supreme Court and the Bombay High Court in similar cases like American Express International Banking Corp. v. CIT - The Court criticized the Revenue's disregard for binding precedents, emphasizing that decisions of constitutional courts are binding until overturned. It directed the CBDT to ensure compliance with judicial orders to prevent undue harassment of taxpayers - The Court quashed the reassessment notices issued under Sections 148A(b) and 148, affirming that the initiation of reassessment proceedings lacked jurisdiction and violated binding judicial precedents. The petition was allowed with explicit directions to enforce judicial discipline among tax authorities
Income Tax Act, 1961 - Section 148, 148A(b), 148A(d) and 149 - The petitioner, challenged the issuance of notices under Section 148A(b) and 148 of the Income Tax Act, as well as an order under Section 148A(d) for the Assessment Year (AY) 2014-15. The reassessment proceedings were based on alleged fictitious purchase transactions amounting to Rs.9.83 crore revealed during a search conducted in October 2021 at Kala Rathi RSW Steel Pvt. Ltd. The petitioner contended that the notices and proceedings were barred by limitation under the first proviso to Section 149 - Whether the notices under Sections 148A(b) and 148 and the order under Section 148A(d) were valid in light of the limitation period prescribed under Section 149 - Whether the reassessment proceedings initiated for AY 2014-15 adhered to the statutory requirements post-amendment by the Finance Act, 2021 - Whether reopening assessments under Section 148 is permissible in cases lacking discovery of assets representing escaped income - HELD - The Court allowed the petition, holding - The first proviso to Section 149 restricts reopening assessments for AYs preceding 1 April 2021 if the notice was beyond the statutory time limit. As per the proviso, no notice under Section 148 could be issued for AY 2014-15 beyond six years from the end of the relevant AY - The information derived from the search did not reveal assets representing escaped income attributable to the petitioner, rendering the reassessment invalid under the extended timeframe of ten years - Post-2021 searches must meet the timeframes under Sections 149, 153A, and 153C as they existed before the Finance Act, 2021. The Court relied on precedents in Dinesh Jindal v. Assistant Commissioner of Income Tax and Ojjus Medicare Pvt. Ltd. to affirm the computation of limitation - Uploading information on the Insight portal by the department does not substitute the statutory requirement of material handover to the Assessing Officer (AO) - The Court quashed the notices under Sections 148A(b) and 148, along with the order under Section 148A(d), declaring them barred by limitation. The reassessment proceedings were held unsustainable in law, thereby allowing the petition
Income Tax Act, 1961 - Section 54 and 260A - The appellant, sold a residential property and claimed exemption under Section 54 for capital gains, asserting the construction of a new residential house on agricultural land purchased within the stipulated period. The Assessing Officer (AO) disallowed the exemption, concluding that the structure on the property was a makeshift arrangement and not a residential house. The Inspector’s report indicated the presence of plywood rooms, no electricity or water connection, and a vast, uninhabited land. The CIT(A) reversed the AO's decision, considering minimal utilities as sufficient for a rural area. However, the ITAT reinstated the AO’s findings, holding that basic amenities required for a residential house were absent - Whether the makeshift structure qualified as a "residential house" under Section 54 - Whether basic amenities like electricity, water, and proper construction are mandatory for claiming exemption under Section 54 - Whether ITAT erred in rejecting evidence, including certificates by the Sarpanch and architect, and reversing the CIT(A)'s findings - HELD - The Court upheld ITAT's view that plywood rooms without basic amenities such as electricity, water, and proper construction cannot be construed as a residential house under Section 54. The structure failed to meet the standard for a dwelling unit meant for habitation - The Court held that a residential house, even in rural areas, must have essential facilities for habitation, such as electricity and water supply. The absence of these amenities rendered the construction inadequate for exemption under Section 54 - The Court noted that ITAT was correct in giving precedence to the Inspector's physical inspection over certificates provided by the Sarpanch and architect, as these lacked sufficient evidentiary value to contradict the ground realities observed - The Court dismissed the appeal, affirming the ITAT's findings that no residential house was constructed within the stipulated period, thereby disallowing the exemption under Section 54. No substantial question of law was found to arise
Income Tax Act, 1961 - Section 147, 148, 143(2), 144 - The assessee, a Singapore tax resident, sold shares in its Indian subsidiary to another group entity, claiming exemption from capital gains tax under the India-Singapore Double Taxation Avoidance Agreement (DTAA). The sale was based on a valuation report prepared for RBI compliance. The Indian tax department reopened the assessment under Section 148, alleging underreporting of capital gains by Rs. 64.97 crore, citing discrepancies in valuation under Rule 11UA. The company challenged the reopening of assessment, citing lack of new tangible material and procedural irregularities, including alleged non-compliance with Section 151 approval requirements - Whether reopening of the assessment under Section 148 was justified in the absence of fresh tangible material or jurisdictional facts - Whether the tax department erred in relying on a valuation report prepared for RBI compliance without evidence of income escaping assessment - Whether procedural lapses, including lack of cooperation from the assessee, justify best judgment assessment under Section 144 - HELD - The Court held that reopening of the assessment was valid as there were sufficient reasons for the belief that income had escaped assessment. The tax department's reliance on discrepancies in the valuation report was deemed appropriate for initiating proceedings - The Court found that the valuation discrepancies raised a prima facie case for reassessment. However, it emphasized the importance of the petitioner cooperating in providing relevant documents and explanations to resolve the matter - The Court noted that the petitioner did not cooperate with the tax department by failing to provide the required information despite multiple opportunities. This justified the continuation of proceedings and potential invocation of best judgment assessment under Section 144 - The Court dismissed the contention regarding lack of approval under Section 151, holding that the department complied with procedural requirements - The writ petitions challenging the reopening of assessment and related notices were dismissed. The department was directed to complete the reassessment within three months, allowing the petitioner a final opportunity to submit objections and cooperate. The department was authorized to invoke Section 144 if the petitioner failed to cooperate. No costs were imposed
Income Tax Act, 1961 – Sections 263, 47(iv), 115-O - Indo-Singapore DTAA - The case concerns the transfer of equity shares by a Singapore-based entity to its wholly-owned Indian subsidiary. The transaction, valued at USD 1,397,263,241, was claimed as exempt from capital gains tax under Section 47(iv) of the Income Tax Act, 1961, and the Indo-Singapore DTAA. The Assessing Officer (AO) accepted the exemption claim without detailed inquiries. The revisional authority invoked Section 263, alleging that the transaction was a sham intended to evade Dividend Distribution Tax (DDT) under Section 115-O and that the AO’s order was erroneous and prejudicial to the Revenue's interest - Whether the invocation of Section 263 was justified on grounds of the AO’s failure to conduct adequate inquiries and acceptance of a tax-exempt claim for a transaction alleged to be a sham and a tax avoidance scheme - HELD - The Tribunal and the High Court rejected the invocation of Section 263, holding that: Section 263 requires twin conditions–erroneous order and prejudice to Revenue–to be satisfied. These were not met in the case - The AO conducted inquiries, and the transaction was validly exempt under Section 47(iv). The revisional authority's allegation of tax avoidance did not establish that the AO’s order was erroneous - Any potential liability related to DDT would fall on the Indian subsidiary under Section 115-O, not on the Singapore-based entity. The revisional authority failed to establish how the alleged sham transaction prejudiced the Revenue concerning the non-resident entity - Mere inadequacy of inquiry does not justify revision unless a total lack of inquiry is proven. The Commissioner cannot substitute their judgment for the AO’s discretionary conclusion - The Court upheld the Tribunal's quashing of the revisional order, dismissing the appeal as no substantial
Income Tax Act, 1961 – Sections 69C, 147, 148 - Direct Tax Vivad Se Vishwas Act, 2020 – Sections 2(1)(o), 4, 5 and 6 - The petitioner challenged the issuance of a revised Form No. 3 dated 29.01.2021 by the Designated Authority under the DTVSV Act. Initially, a certificate under Form No. 5 had been issued after settling the tax arrear for AY 2012-13, based on a reassessment order under Section 147 adding undisclosed expenditure under Section 69C. The petitioner had settled the tax arrear under the DTVSV scheme, receiving final settlement immunity. The revised Form No. 3 sought to reopen the concluded settlement - Whether the Designated Authority under the DTVSV Act can revise or reopen a settled and finalized tax dispute after issuing Form No. 5 under Section 5 - HELD - Once a certificate under Form No. 5 is issued, the DTVSV Act provides immunity under Section 6, and the tax dispute is conclusively settled - The issuance of a revised Form No. 3 lacks statutory authority, as the DTVSV Act does not empower the Designated Authority to reopen a finalized settlement - The provisions of the DTVSV Act mandate that upon settlement, no further proceedings related to the tax arrear can be initiated - The Designated Authority acted beyond its jurisdiction, as the Act unequivocally prohibits reopening settled disputes after the issuance of Form No. 5 - The revised Form No. 3 was quashed, and the petition was allowed, affirming the conclusive nature of the settlement under the DTVSV Act. All pending applications were disposed of
Income Tax Act, 1961 – Section 9(1)(i) - The appellant, a non-resident enterprise based in the USA, provided Money Transfer Services (MTS) worldwide, including India, through local agents. It operated a Liaison Office (LO) in India under RBI approval, restricted to communication and support functions. The Assessing Officer (AO) attributed income to India, concluding the LO constituted a Fixed Place PE and a Dependent Agent Permanent Establishment (DAPE) under Articles 5(1) and 5(4) of the DTAA. The CIT(A) concurred, relying on training, software usage, and agent management activities. The Tribunal reversed this, holding the LO’s activities were preparatory or auxiliary under Article 5(3) - Whether the LO constituted a Fixed Place PE under Article 5(1) or performed preparatory/auxiliary functions under Article 5(3) of the DTAA - Whether activities performed by Indian agents established a DAPE under Article 5(4) - Whether the software installed for agents created a Fixed Place PE – HELD - The LO’s activities, including agent training, software distribution, and communication, were preparatory or auxiliary under Article 5(3). These did not meet the threshold of core revenue-generating functions - The Court emphasized that Indian agents were independent entities operating at arm's length. They lacked authority to conclude contracts on behalf of the appellant, failing the DAPE test under Article 5(4) - The software facilitated agent communication with servers outside India. Mere access did not confer control or disposal of a fixed place of business in India - The appeals were dismissed, affirming the Tribunal's conclusion that the appellant had no Permanent Establishment in India under the DTAA. The income was held non-taxable in India
Income Tax Act, 1961 - Section 54F, 133(6) and 260A - The appellant, sold a plot inherited from her husband for Rs.77,75,000 during AY 2013-14 and invested the proceeds in purchasing two flats in the same residential tower for Rs.44,13,775 and Rs.42,39,275. She claimed exemption under Section 54F for the entire capital gain, contending the two flats formed "a residential house." The Assessing Officer (AO) denied the claim, stating the flats were on different floors, physically unconnected, and hence could not constitute a single residential unit. The CIT(A) and ITAT upheld the denial but allowed partial exemption for the higher-valued flat. Aggrieved, the assessee appealed to the High Court - Whether the phrase "a residential house" in Section 54F of the Act permits exemption for multiple residential units acquired through investment in capital gains - Whether the two flats purchased by the assessee, situated on separate floors and at opposite ends of the tower, can be treated as "a residential house" for the purpose of exemption under Section 54F - HELD - The Court analyzed the pre-amended Section 54F and noted that the phrase "a residential house" has been judicially interpreted to allow exemption for multiple units only when they form a cohesive dwelling unit - Citing precedents like Gita Duggal and D. Ananda Basappa, the Court distinguished cases where multiple units were adjacent or physically combined to function as one house. In contrast, the assessee’s flats were on separate floors and spatially distinct, precluding their use as a unified residential house - The Court observed that the amendment to Section 54F by the Finance Act, 2014, replacing "a residential house" with "one residential house," clarified the legislative intent to restrict exemption to a single unit. While this amendment was prospective, it underscored the consistent intent of the provision - The Court rejected the appellant's reliance on earlier judicial interpretations, holding that adjacency and integration are critical for treating multiple units as one residential house. The builder's confirmation that the flats could not be structurally merged further negated the appellant’s claim - The appeal was dismissed. The Court upheld the ITAT’s decision to grant partial exemption under Section 54F for the higher-valued flat while denying exemption for the second flat. The phrase "a residential house" was interpreted to mean a single residential unit, consistent with the intent and wording of the Act
Income Tax Act, 1961 – Sections 132 and 132B – The assessee, engaged in the jewelry business, was subjected to a search and seizure operation on 18.05.2023. Jewelry, including gold and diamonds, was seized from the company's locker, despite the directors confirming it as part of the company’s stock-in-trade. The petitioner argued that the action violated Section 132, which prohibits seizing stock-in-trade, and demanded the release of the seized inventory. The Income Tax Department claimed the jewelry could be personal assets based on loose papers found during the search and the alleged discrepancies in stock records - Whether the jewelry seized from the petitioner's locker was part of its stock-in-trade and therefore exempt from seizure under Section 132 - Whether the respondents were justified in withholding the seized jewelry without passing an order under Section 132B - Legality of the respondents' action in light of the procedural safeguards and statutory provisions - HELD - Section 132 explicitly bars the seizure of stock-in-trade. The seized inventory matched the stock records provided by the petitioner, and the respondents failed to prove it was personal property of the directors. The jewelry stored in the company’s locker was deemed stock-in-trade - The respondents failed to pass an order under Section 132B for releasing or retaining the seized inventory, violating the statutory procedure. This inaction was arbitrary and unjustified - The Court observed that discrepancies between stock values on different dates were irrelevant for determining the ownership of the seized items. The stock-in-trade status exempted the inventory from seizure - The Court relied on prior judgments (Mitaben R. Shah, Sri Pushpa Ranjan Sahoo, and others) that emphasized procedural compliance and barred retention of stock-in-trade beyond statutory limits - The writ petition was allowed. The Court directed the respondents to release the seized jewelry as per the panchnama and inventory prepared on 17.07.2023, emphasizing the statutory prohibition against seizing stock-in-trade. Pending applications were disposed of, and no costs were imposed
Income Tax Act, 1961 – Sections 147, 148, 148A, 149 and 150 - The assessee, was subject to search and seizure operations on 07.04.2017, during which no incriminating material was found. Subsequent assessment under Section 153A added Rs.11.35 Crores under Section 69A for unexplained income. The CIT(A) deleted the addition, citing the absence of incriminating material, and the ITAT upheld this decision. The Revenue's further appeal was dismissed by the High Court. Thereafter, the AO issued a notice under Section 148A(b) in 2024, invoking Section 147 to reassess AY 2015-16. The assessee challenged this, asserting that the notice violated the limitation period prescribed under Section 149 and that the Revenue could not invoke Section 150 to extend the limitation period - Whether the reassessment notice under Section 148, issued beyond the limitation period under Section 149(1), is sustainable - Whether the decision in Principal Commissioner of Income Tax v. Abhisar Buildwell Pvt. Ltd. permits reopening assessments irrespective of statutory limitations - Applicability of Sections 147 and 150 to overcome the statutory limitation – HELD - The reassessment notice issued under Section 148A was time-barred under Section 149(1). The Revenue's reliance on Section 150, alleging directions from prior judicial orders, was misplaced, as neither the ITAT nor the High Court provided such findings or directions for reassessment - The Supreme Court in Abhisar Buildwell Pvt. Ltd. allowed reassessment only if statutory conditions under Sections 147 and 148 are fulfilled. It did not waive the limitation prescribed under Section 149. The Revenue's interpretation to bypass these conditions was rejected - The Court reiterated that procedural compliance, including adherence to statutory time limits, is critical to prevent arbitrary exercise of power. The observations in Abhisar Buildwell Pvt. Ltd. were not carte blanche for reopening assessments beyond statutory limitations - The petition was allowed. The High Court quashed the reassessment notice under Section 148A(3) and subsequent notice under Section 148 for AY 2015-16, declaring them invalid due to exceeding the limitation period under Section 149(1). Pending applications were also disposed of
Income Tax Act, 1961 - Section 92CA, 144C and 260A - The assessee, challenged the inclusion of "E4e Healthcare Business Services Pvt. Ltd." as a comparable entity for benchmarking international transactions of IT-enabled services. The Transfer Pricing Officer (TPO) included E4e Healthcare, rejecting the assessee’s objections about the lack of financial data in the public domain. The Dispute Resolution Panel (DRP) and ITAT upheld the inclusion, incorrectly assuming that the assessee’s objections were based on an "employee cost filter" failure. The ITAT also cited past assessments where E4e Healthcare was included without dispute - Whether the inclusion of E4e Healthcare as a comparable entity was justified when the assessee’s objections about non-availability of financial data were ignored - Whether the ITAT erred in rejecting the assessee’s contention based on an incorrect assumption that the objection related to the employee cost filter - Whether reliance on past assessments without considering the functional comparability for the relevant year was sustainable – HELD - The decisions of the TPO, DRP, and ITAT were fundamentally flawed, as they were based on an incorrect assumption that the assessee raised objections regarding the employee cost filter. The Court observed that the assessee’s core objection was the non-availability of financial data, which was never adjudicated. It was also noted that the ITAT wrongly relied on the prior year’s inclusion of E4e Healthcare without verifying functional comparability for the current year. Since the matter was never examined on merits, the inclusion of E4e Healthcare as a comparable was set aside - The High Court restored the matter to the TPO for fresh examination of the inclusion of E4e Healthcare as a comparable entity, reserving all rights and contentions of the parties. The appeal was allowed in favor of the assessee
Income Tax Act, 1961 – Section 14A and Rule 8D - The assessee, declared dividend income of Rs.8.55 crore for AY 2008-09, which was exempt under Section 10(34). The assessee voluntarily disallowed Rs.7,50,000 as expenditure incurred for earning this exempt income. The AO, without recording dissatisfaction with the assessee's computation, invoked Rule 8D and determined the disallowance at Rs.93,62,120. After adjusting the voluntary disallowance, the AO added Rs.86,12,120. The CIT(A) reduced the disallowance to Rs.20,00,000 on an ad hoc basis, finding no defect in the assessee's computation. The ITAT held that the AO failed to record satisfaction regarding the inadequacy of the assessee’s computation, thus invalidating the application of Rule 8D - Whether the AO could invoke Rule 8D without recording dissatisfaction with the assessee's computation of disallowance under Section 14A - Whether the ITAT was correct in restricting the disallowance to the assessee’s voluntary disallowance of Rs.7,50,000 – HELD - The Court reiterated that under Section 14A(2), the AO must examine the assessee’s accounts and record satisfaction that its computation is incorrect before invoking Rule 8D. This procedural safeguard ensures fairness and prevents arbitrary application of Rule 8D. In this case, neither the AO, CIT(A), nor ITAT found the assessee's computation defective. Thus, invoking Rule 8D was unwarranted, as held in precedents like Coforge Ltd. v. ACIT and Maxopp Investment Ltd. v. CIT - The ITAT correctly upheld the voluntary disallowance of Rs.7,50,000 as reasonable, reflecting actual expenditure attributable to earning exempt income. Ad hoc disallowance by CIT(A) was rejected for lacking evidentiary basis - The Court upheld the ITAT’s decision, dismissing the Revenue's appeal. It held that Rule 8D could not be invoked without proper satisfaction, and the voluntary disallowance of Rs.7,50,000 was justified. The appeal was decided in favor of the assessee. Pending applications were also disposed of
Income Tax Act, 1961 – Section 11, 12AA(3), 12A and 2(15) - The assessee, a government-established charitable society, sought exemption under Section 11 of the Income Tax Act. The Commissioner of Income Tax (CIT) canceled its registration under Section 12A with retrospective effect from 2004-05, citing non-genuine activities and deviation from its objects. The CIT's cancellation was challenged on the grounds that the power under Section 12AA(3) to cancel registration was introduced only from 01.06.2010, making retrospective application invalid. The Revenue alleged the society failed to justify its charitable purpose during the construction phase and engaged in activities beyond its stated objects - Whether the cancellation of registration under Section 12A with retrospective effect was valid - Whether construction activities during the initial years disqualified the society from being considered charitable under Section 11 - Whether incidental activities like MOUs with other state bodies for medical development violated the definition of "charitable purpose" under Section 2(15) - HELD - The power under Section 12AA(3) to cancel registration could not be applied retrospectively before 01.06.2010. The CIT lacked jurisdiction to cancel registration for assessment years prior to the amendment. Citing Ahmedabad Urban Development Authority and New Noble Educational Society, the Court emphasized that retrospective application of statutory powers was impermissible - The Court concluded that the construction of a medical college and hospital was integral to fulfilling the society's charitable purpose. Funds received and utilized during the period were for the advancement of medical relief, meeting the criteria under Section 11. The Court rejected the Revenue’s contention that construction delays indicated non-charitable activities - The Court ruled that entering MOUs with state universities for medical collaboration constituted incidental activities furthering charitable purposes. Such activities aligned with the society's objects under Section 2(15) and did not constitute "trade, commerce, or business" as prohibited under the proviso to the section - The Court set aside the cancellation of registration under Section 12A, holding it unlawful both retrospectively and prospectively. It restored the society's exemption under Section 11 and dismissed the Revenue's appeals. The society's activities, including construction and MOUs, were deemed charitable, and all related assessments and penalties were quashed. Appeals filed by the assessee were allowed, while those by the Revenue were dismissed
Income Tax – Section 3, 4 and 5 of Direct Tax Vivad Se Vishwas Act, 2020 - The petitioner sought settlement of disputes under the DTVSV Act by filing a declaration under Section 3, confining it to its appeal (ITA No.5958/Del/2014), which challenged the disallowance of Rs.50,12,337 as trading losses. The Revenue, however, modified the declaration to include issues from its appeal (ITA No.5411/Del/2014), relating to the deletion of Rs.3,50,00,000 added under Section 68 as unexplained credit. The petitioner contended that disputes could be confined to specific appeals under the DTVSV Act, whereas the Revenue argued that settlement must cover all disputes for the relevant assessment year - Whether the petitioner can limit the settlement under the DTVSV Act to disputes raised in its own appeal without including issues from the Revenue’s appeal for the same assessment year - Whether the "unit of settlement" under the DTVSV Act is the assessment year or the specific appeal – HELD - The "unit of settlement" under the DTVSV Act is a specific appeal, writ petition, or special leave petition, not the entire assessment year. Section 2(1)(j) and 2(1)(a) clearly indicate that "disputed tax" and "appellant" are tied to the specific subject matter of an appeal - The Court emphasized that the petitioner, as a declarant, has the discretion to settle disputes selectively under the DTVSV Act. Circular No. 9/2020 further supports this interpretation by clarifying that taxpayers can settle disputes from specific appeals or issues - The Revenue's appeal (ITA No.5411/Del/2014) pertained to unexplained credits under Section 68, unrelated to the petitioner’s appeal on trading losses in derivatives. Therefore, including disputes from the Revenue’s appeal violated the petitioner’s right to confine its declaration to its appeal under the DTVSV Act - The Court directed the Revenue to issue a modified certificate under Section 5(1) of the DTVSV Act, restricting the declaration to the petitioner’s appeal (ITA No.5958/Del/2014) and excluding unrelated disputes. The petition was allowed, affirming the petitioner’s right to selective settlement
Income Tax Act, 1961 – Section 220(6) and 245 - The petitioner, engaged in the manufacturing and trading of telecommunication equipment, filed an appeal before the CIT(A) against an assessment order for AY 2015-16, which raised a tax demand of Rs.43.38 crore. A stay was granted under Section 220(6) subject to payment of 20% of the disputed demand. Despite compliance by the petitioner, the Revenue adjusted refunds due for AYs 2008-09 and 2017-18 against the stayed demand. The petitioner contended that such adjustments violated the Office Memorandum (OM) dated 29.02.2016 issued by the CBDT, limiting recoveries to the pre-deposit amount required for stay - Whether the Revenue’s adjustment of refunds against a demand stayed under Section 220(6) is valid - Whether the Revenue violated the guidelines in the CBDT's OM dated 29.02.2016 by recovering amounts exceeding the stipulated pre-deposit of 20% - Whether the petitioner was arbitrarily disadvantaged compared to taxpayers without refunds due – HELD - The adjustment of refunds beyond the 20% stipulated pre-deposit violated the OM issued by CBDT, which requires adherence to specific conditions for such adjustments. The Revenue failed to provide reasons justifying recovery beyond 20%, contrary to guidelines in Eko India Financial Services Pvt. Ltd. v. ACIT - The Court observed no allegation that the petitioner was alienating assets to evade potential recovery. Thus, adjustments against refunds placed the petitioner at a disadvantage compared to those without refundable amounts - Adjustments of refunds exceeding the prescribed pre-deposit were held to be arbitrary and not aligned with the principles of fairness and reasonableness enshrined in administrative law - The High Court quashed the Revenue's adjustment of refunds and directed it to refund the excess amount with applicable interest within eight weeks. The petition was allowed