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
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
Income Tax Act, 1961 – Sections 145, 147, 143(3) and 68 – The assessee, engaged in manufacturing craft paper, was assessed based on information from the VAT Department that purchases made from M/s Chauhan Suppliers were bogus. The supplier's TIN was canceled ab initio. The AO disallowed purchases totaling Rs.1.05 crores for A.Y. 2014-15, treating them as bogus. The CIT(A) reduced the addition, estimating profit at 7.5% of the disallowed amount, and the Tribunal upheld this decision - Whether the entire amount of alleged bogus purchases should be disallowed - Whether estimating profit at 7.5% of the purchases was justified – HELD - The Court observed that the AO did not reject the books of accounts under Section 145 or find discrepancies in production, sales, or yield ratios. Thus, it was inappropriate to disallow the entire purchase amount - Relying on precedents such as CIT v. Simit P. Sheth, the Court upheld the CIT(A)'s and Tribunal’s decision to restrict the addition to 7.5% of the alleged bogus purchases, considering probable savings in VAT and other costs – Appeals by the revenue dismissed. No substantial question of law arises; profit determination at 7.5% upheld
Income Tax Act, 1961 – Sections 10A, 92C, 92CA, 143(2) and 260A – The assessee engaged in software development, claimed deductions under Section 10A for its Software Technology Park (STP) units, including the NOIDA-II unit. The Assessing Officer (AO) denied the deduction for NOIDA-II, arguing it was a mere extension of the NOIDA-I unit and hence ineligible. Additionally, the AO made a transfer pricing adjustment of Rs.4.95 crore under Section 92CA, based on benchmarking discrepancies. Both adjustments were overturned by the Commissioner of Income Tax (Appeals) [CIT(A)] and upheld by the ITAT - Whether the NOIDA-II unit was a new undertaking eligible for deduction under Section 10A - Whether the transfer pricing adjustments were valid given the benchmarking at an entity level instead of unit level - Whether the disallowed prior period expense of Rs.19,26,120 was allowable in the relevant year – HELD - NOIDA-II was a new undertaking, established with substantial fresh capital and separate operational infrastructure. The doubling of gross block and seating capacity indicated it was distinct from NOIDA-I. The condition under Section 10A(2)(ii) (not formed by reconstruction of an existing business) was satisfied, and past decisions recognizing this were binding under the rule of consistency - The Court ruled that benchmarking international transactions at an entity level was justified due to the unity of management, interlacing of funds, and the integrated nature of operations. The ITAT correctly determined that the AO’s segmented benchmarking was inappropriate given the operational and financial integration of the units - The Court agreed with ITAT and CIT(A) that the expense crystallized in the relevant financial year, making it allowable for deduction - The High Court dismissed the Revenue’s appeal, affirming the ITAT's ruling in favor of the assessee on all counts. Deduction under Section 10A for the NOIDA-II unit, deletion of transfer pricing adjustments, and allowance of prior period expenses were upheld
Income Tax Act, 1961 - Section 147, 148, 153C and 260A - The assessee, challenged reassessment proceedings initiated under Section 147 for AY 2011-12. The reassessment was based on information obtained during a search conducted on the Jain Brothers, revealing that the assessee received accommodation entries totaling Rs.11.39 crore and invested in penny stocks. The assessee contended that the proceedings should have been initiated under Section 153C, which governs assessments linked to searches, rather than under Section 147. The ITAT ruled in favor of the assessee, holding that Section 153C overrides Section 147. The Revenue appealed under Section 260A - Whether Section 153C overrides Section 147, precluding reassessment proceedings under Section 147 when information stems from a search – HELD - Section 153C applies only when the conditions specified therein, such as the seizure of documents belonging to a third party, are satisfied. The court distinguished between the jurisdictions of Sections 153C and 147, stating that both provisions operate independently. Section 147 can be invoked where the conditions for Section 153C are unmet, subject to compliance with procedural requirements. The court relied on the Supreme Court's decision in Abhisar Buildwell Pvt. Ltd., which clarified that reassessment under Section 147 is permissible even in cases linked to searches if the jurisdictional preconditions of Section 153C are not satisfied. The ITAT’s decision that Section 153C overrides Section 147 was reversed - Appeal allowed; reassessment under Section 147 upheld, with directions for further adjudication in accordance with the law
Income Tax Act, 1961 – Section 148A(b) and 148A(d) - The petitioner, challenged the notice issued under Section 148A(b) for reopening assessment for AY 2017-18, alleging unexplained cash deposits aggregating Rs.9,43,36,231 in multiple bank accounts. The petitioner contended that the Jurisdictional Assessing Officer (JAO) lacked jurisdiction to issue the notice following the CBDT notification dated 29.03.2022 and that the petitioner's response to the notice was not adequately considered. The petitioner also alleged denial of an oral hearing - Whether the JAO had jurisdiction to issue the notice - Whether the reassessment initiation was valid under Section 148A(b) in the absence of adequate consideration of the petitioner’s response - HELD - The Court rejected the petitioner’s jurisdictional challenge, citing the decision in T.K.S. Builders Pvt. Ltd. v. Income Tax Officer, which upheld the validity of similar notices post-CBDT notification - The Court found that the petitioner failed to provide sufficient information regarding the cash deposits or their sources in response to the notice. The reassessment initiation under Section 148A(b) is a preliminary step to ascertain escaped income, not a final conclusion on tax liability. The AO’s action of issuing the notice was upheld as procedurally valid - The petitioner retains the right to contest the quantum and taxability of the alleged income during reassessment proceedings - Petition dismissed; reassessment proceedings under Section 148A(b) upheld. The petitioner’s rights to challenge the findings during reassessment are reserved
Income Tax Act, 1961 - Sections 92CA, 92C and 32 - The Assessee, a private company, claimed depreciation for AY 2011-12 on the written down value of a trademark acquired in FY 2006-07. The Transfer Pricing Officer (TPO) determined the Arm’s Length Price (ALP) of the transaction for acquiring the trademark as Nil, leading the Assessing Officer (AO) to disallow the depreciation claim. The ITAT remanded the matter for re-examination, instructing the AO and TPO to reassess the ALP and depreciation claim - Whether the determination of ALP at Nil for the trademark transaction, concluded in FY 2006-07, was valid for AY 2011-12 - Whether the depreciation claim on the trademark was admissible in light of the ALP determination - Whether the TPO had jurisdiction to re-examine a transaction finalized in an earlier assessment year – HELD - The court observed that the purchase of the trademark during FY 2006-07 was a singular international transaction. Therefore, its ALP determination should have been confined to the relevant year of acquisition. The subsequent references to the TPO for reassessing the ALP for AY 2011-12 were jurisdictionally flawed. The court held that the TPO cannot reassess the business expediency or validity of a transaction finalized in an earlier year. Furthermore, the depreciation claim for AY 2011-12 should be based on the asset’s written down value and prior ALP determination, if finalized. The court emphasized the distinction between a valid depreciation claim and a fresh transfer pricing audit - The court set aside the TPO’s impugned order for AY 2011-12, holding it to be without jurisdiction. It directed the AO to reassess the Assessee’s depreciation claim in accordance with law and prior ITAT directions, while barring further ALP determination for the concluded transaction. The petition was disposed of in these terms
Income Tax Act, 1961 - Section 92CA read with Rule 10B(1)(e) and Section 260A - The Revenue filed an appeal challenging the decision of the appellate tribunal regarding transfer pricing adjustments for a specified assessment year. The dispute centered on the selection and rejection of entities for benchmarking the Arm’s Length Price (ALP) of international transactions conducted by the Assessee, a captive service provider rendering basic operational support to its overseas associated enterprise - Whether entities with significant functional dissimilarities, diversified business profiles, and higher risk-taking capacities can be included as comparables for determining the ALP of a captive service provider offering low-risk routine services – HELD - The tribunal excluded certain entities due to their functional dissimilarities, including engagement in knowledge-based, high-value, diversified services or full-fledged risk-taking operations. The court upheld the tribunal's decision, agreeing that these entities were not suitable for comparison with the Assessee, which was a low-risk, captive service provider. The court emphasized the importance of aligning functional profiles, risk levels, and business operations in transfer pricing analysis, as mandated under the statutory framework. It also noted that inclusion of inappropriate comparables could distort the determination of the ALP - The court dismissed the Revenue’s appeal, confirming that the selection of comparables must strictly adhere to statutory guidelines and judicial precedents, ensuring functional and risk-based alignment between the entities under comparison
Income Tax Act, 1961 - Sections 147, 148 and 153C – The assesse had its income reassessed for AY 2011-12 under Section 147/148 based on information from a search conducted on Jain Brothers, who were identified as providing accommodation entries through dummy entities. The Assessing Officer (AO) added Rs.25,45,000 to the assessee's income under Sections 68 and 69C. The ITAT set aside the reassessment, holding that proceedings should have been initiated under Section 153C, as the information was derived from a search. The Revenue appealed, contending that Section 153C was inapplicable as jurisdictional conditions were not met, and reassessment under Section 147/148 was valid - Whether reassessment proceedings under Section 147/148 were valid in a case involving information from a search operation - Whether the proceedings should have been initiated under Section 153C instead of Section 147/148 – HELD - The Court ruled in favor of the Revenue, holding - The Court found that the jurisdictional conditions under Section 153C, as in force at the relevant time, were not satisfied. Specifically, no material belonging to the assessee was found during the search on Jain Brothers, precluding the application of Section 153C - Since Section 153C was inapplicable, the AO was justified in initiating reassessment under Section 147/148 based on credible information from the Investigation Wing regarding accommodation entries. The reliance on such information satisfied the "reason to believe" threshold required for reopening assessments - The Court relied on the Supreme Court decision in PCIT v. Abhisar Buildwell (P.) Ltd., affirming that Section 147/148 proceedings are permissible when Section 153C conditions are unmet - The appeal was allowed, setting aside the ITAT's order. The matter was remanded to the ITAT for adjudication of other grounds raised by the assessee
Income Tax Act, 1961 – Sections 56(2)(viib), 148, 133(6) and Rule 11UA(2) - The assesse issued shares at a premium of Rs.143 per share based on valuation via the Discounted Cash Flow (DCF) method, as prescribed under Rule 11UA(2). The Assessing Officer reopened the assessment under Section 148, alleging escapement of income based on discrepancies between DCF projections and actual results, and questioned the DCF valuation, asserting a difference of Rs.80 per share, amounting to Rs.2.87 crore - Whether the reopening of assessment under Section 148 based on alleged discrepancies in DCF valuation is valid - Whether the Assessing Officer can disregard the DCF method and impose the Net Asset Value (NAV) method for determining share value under Rule 11UA(2) – HELD - Rule 11UA(2) provides the assessee an option to adopt either the DCF or NAV method for valuation. Once the DCF method is chosen and followed, the Assessing Officer cannot impose the NAV method or question projections used in DCF valuation based on subsequent actual results - It was further held that reopening under Section 148 was invalid as the reasons recorded were fundamentally erroneous, relying on impermissible questioning of the valuation method rather than substantive evidence of escapement of income - The Court relied on the Delhi High Court decision in Agra Portfolio (P.) Ltd. and the Himachal Pradesh High Court in PCIT vs. I.A. Hydro Energy (P) Ltd., confirming that the valuation method choice lies with the assessee, and post-facto deviation from projections does not justify reopening - The High Court quashed the notice issued under Section 148, holding it without jurisdiction and contrary to law. Rule was made absolute in favor of the petitioner, with no costs awarded