Allahabad high court on reopening u/s 148 reasons "live nexus" with addition in assessment sine qua non otherwise whole proceedings bad; cash credit source of source cannot be asked (itat order order) ass fav decision on loans : section 68; Madras high court agricultural land capital gains relevant principles (itat reversed) ass fav order section 2(14) capital asset;Allahabad high court on conversion of firm to co. under chapter IX companies act no transfer & no capital gains; P&H high court on addition of cash sales (unproved and unexplained) held rightly added u/s 68 and rule 27 ITAT limited scope;

[Kapil Goel]

 

HIGH COURT OF JUDICATURE AT ALLAHABAD

AFR
Court No. 33


Income Tax Appeal No. 264 of 2005

Commissioner of Income Tax-I, .......... Appellant
Kanpur
Versus
Shri Amarjeet Singh (HUF) .......... Respondent

 

"(1) Whether the Income Tax Appellate Tribunal was justified in law in allowing the appeal of the assessee by cancelling the re-assessment proceedings made by the Assessment Officer u/s 147 of the I.T.Act, 1961 without appreciating the facts of the case and without going to the sprit of the provision of section 147 of the I.T.Act?

(2) Whether the Income Tax Appellate Tribunal was justified in law in cancelling the re-assessment proceedings u/s 147 of the I.T.Act on technical ground and not adjudicated the issue on the merit of the case?"

reasons for issuing the notice under Section 148, namely-
"in this case enquiries were conducted by the DDIT (Inv.) Unit II (i) Kanpur. The DDIT's report containing information in respect of investments made by the assessee in acquisition of immovable properties, purchase of car and in business as well as deposits made in various banks has been received.
The assessee's jurisdiction was with erstwhile ACIT Cir 2(3) Kanpur. Therefore, ACIT II, Kanpur was requested to intimate whether the assessee has filed return for the assessment year 1995-96. The ACIT has intimated that there is no control register and it is very difficult to ascertain as to whether the return of income has been filed or not.
The assessee has not disclosed the investments as reported by the DDIT (Inv.) Unit II (i) Kanpur. We have therefore, reason to believe that the assessee has not truly and fully disclosed the particulars of income and investments in properties, cars and in bank deposits. It is estimated that the assessee has escaped assessments exceeding Rs. 1.0 lac for which provisions of section 147 of the Act are clearly attracted for which notice u/s 148 is required to be issued."

From the aforesaid, it is clear that the reasons recorded by the Assessing Officer mentions about the undisclosed investments in the business, purchase of car, acquisition of immovable properties as well as the deposits in various banks. Nothing has been stated or indicated in the reasons so recorded with regard to any undisclosed investments made by the assessee in the purchase of shares. We find from a perusal of the assessment order that the addition had been made on account of investments made in the purchase of shares. We are of the opinion that the reasons recorded by the Assessing Officer has no nexus or a live link with the addition made by him in the assessment order. There has to be a live link between the reasons recorded and the additions so made in the assessment order.

 

IN THE HIGH COURT OF JUDICATURE AT MADRAS

Dated : 06.08.2014

Tax Case (Appeal) Nos.566 and 567 of 2013

& M.P.Nos.1 and 1 of 2014

Mrs.Sakunthala Vedachalam

9. The issue involved in the above Tax Case (Appeals) lies on the narrow compass, viz., whether the lands sold by the assessees are agricultural lands and whether they are entitled to the benefit of exemption from capital gains tax.

16. Once the Tribunal has accepted that the classification of lands as per the reveue records are agricultural lands, which are evidenced by the adangal and the letter of the Tahsildar and satisfies other conditions of Section 2(14) of the Income Tax Act, we are of the view that the Tribunal has misdirected itself as stated above.

 

                17. Yet other reason given by the Tribunal is that the adjacent lands are put to commercial use by way of plots and therefore, the very character of the lands of the assssees is doubted as agricultural in nature.  The manner in which the adjacent lands are used by the owner therein is not a ground for the Tribunal to come to a conclusion that the assessees' lands are not agricultural in nature.  The reason given by the Tribunal that the adjacent lands have been divided into plots for sale would not mean that the lands sold by the assessees were for the purpose of development of plots. Also the reasoning given by the Tribunal "No agriculturists would have purchased the land sold by the assessee for pursuing any agricultural activity" is based on mere conjectures and surmises. 

 

                18. The plea of the learned standing counsel appearing for the Revenue that there was no agricultural operations prior to the date of sale is of no avail as the definition under Section 2(14) of the Income Tax Act has the answer to such a plea raised.  Further more, it is also on record that the lands are agricultural lands classified as dry lands, for which kist has been paid. 

 

                19.  The view of the assessee is fortified by the decision reported in (1937) 32 ITR 466 (Commissioner of Income-tax V. Raja Benoy Kumar Sahas Roy), wherein, it is held as follows:

                "There was authority for the proposition that the expression  "agricultural land"  mentioned in Entry 21 of List II of the Seventh Schedule to the Government of India Act, 1935, should be interpreted in its wider significance as including lands which are used or are capable of being used for raising any valuable plants or trees or for any other purpose of husbandry (See Sarojinidevi v. Shri Krishna Anjanneya Subrahmanyam and other(1) and Megh Raj v. Allah Rakhia (2))."

               

                20. For the foregoing reasons, we pass the following order:

(i)On the question of law raised, we are of the view that the Tribunal was not justified in rejecting the exemption.  Accordingly, the questions of law are answered in favour of the assessees;

 

HIGH COURT OF JUDICATURE AT ALLAHABAD

Court No. - 33
Case :- INCOME TAX APPEAL No. - 289 of 2009
ASSESSMENT YEAR 1997-98
Appellant :- Commissioner Of Income-Tax Agra And Another
Respondent :- M/S Ajanta Raj Dairy, Agra
Counsel for Appellant :- S.C.,A.N.Mahajan,B.Agrawal,Shambhoo Chopra
Counsel for Respondent :- M.Manglik,Rahul Agarwal,Santosh Mishra

(i)Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is correct in law in holding that by the Registration of a Partnership Firm as a Limited Company under Part-IX of the Companies Act, transfer of movable and immovable assets of the firm vested in the firm on the date of the registration of the company to a Limited Company incorporated under the provisions of Section 575 of the Companies Act is statutory and not voluntary and, therefore, provisions of Section 45(1) or Section 45(4) of the Income Tax Act, 1961 are not attracted in this case ignoring the decision of the Hon'ble Supreme Court in the case of M/s Mc. Dowell & Co. Vs. CTO 154 ITR 148?

It is the case of the Department that it was a case of transfer of business of a going concern, which is a capital asset and this took place during the year from the partnership firm to the newly incorporated company. The CIT(A) further mentioned that the revaluation reserve which was an unrealized reserve till 7.4.1996 became realized reserve in the hands of the firm by the allotment of additional shares to the erstwhile partners of the firm. On 8.4.1996, when the partners got shares in lieu of the revaluation reserve the gain became a real gain and did not remain a fictional gain. But the A.O. has not considered any profit arising on account of revaluation of the assets. It was only on 8.4.1996 that the A.O. worked out the short-term capital gain and assessed it.
Further, in the instant case, the partnership firm, which came into existence on 31.08.1995 having seven partners. Later, it became a joint stock company within the meaning of Section 566 of the Companies Act and the same was registered on 08.04.1996. The share holding of the erstwhile firm remained with the same seven persons who became Directors. Thus, There was no transfer of assets of the firm to the company. It was only that the business was taken over by the company. It cannot be valued at market price, it had the value at a cost price.
In view of above, no condition of Section 45 of the Act is applicable in the instant case, hence, no capital gain tax attracted in the instant case. Therefore, we find no reason to interfere with the impugned order passed by the Tribunal. The same is hereby sustained alongwith the reasons mentioned therein.
The answer to the substantial questions of law is in favour of the assessee and against the department.

HIGH COURT OF JUDICATURE AT ALLAHABAD

Court No. - 33

Case :- INCOME TAX APPEAL No. - 6 of 2001

(A.Y. 1990-91)

Appellant :- Shri Jai Dayal Raj Kumar
Respondent :- Commissioner Of Income Tax
Counsel for Appellant :- Amit Shukla,A. Bansal,R.S.Agarwal,S.K. Garg
Counsel for Respondent :- C.S.C.,A.N.Mahajan,S.Chopra

 

With this background, we heard learned counsels for the parties and gone through the materials available on record. From the record, it appears that except Rs. 21,000/-, remaining money was paid through banking channel on different dates. The depositor, Sri Jai Dayal Agrawal was examined by the A.O. on 27.11.1991, stating that he had sold the land and consideration was kept by him and later on the same was deposited with the assessee's firm. He has confirmed the loan given to the assessee's firm for earning the interest @ 18%. He has also produced the sale deed dated 07.01.1987 indicating that he had sold the land for a consideration of Rs. 1,92,000/- and after selling he still owned 25 acres of land. He further submitted that he is not maintaining the books of account.
Thus, in the present case, the identity creditworthiness have been proved. The genuineness of the transactions is also proved as the maximum payment was received through the banking channel. Sri Jai Dayal Agrawal, the creditor had appear before the A.O. and confirmed the said transactions. He has shown his pass-book to the A.O. to prove his creditworthiness. Needless to mention that source of the source need not be proved as per the ratio laid down in the following cases:-
(I) S. Hastimal Vs. C.I.T. 49 ITR 273, 279 (Mad.); and
(II) C.I.T. Vs. Daulat Ram 87 ITR 349, SC.
In view of above, we find no reason to interfere with the impugned order passed by the first appellate authority, who has accepted the said loan as genuine. Hence, we set-aside the impugned order passed by the Tribunal and restore the order passed by the first appellate authority. The assessee will get the relief accordingly.
Answer to the substantial question of law is answered in favour of the assesse and against the department.
In the result, the appeal filed by the assessee is allowed.

 

IN THE HIGH COURT OF PUNJAB AND HARYANA AT

CHANDIGARH

ITA No.138 of 2014

Date of decision: 11.7.2014

M/s Self Knitting Works

4. After hearing learned counsel for the appellant, we do not find

any merit in the appeal.

5. The answer to the following two questions arise for

adjudication in the present appeal:-

(a) Whether in the facts and circumstances, the addition of `

37,30,300/- as unexplained sales was justified?

(b) Whether the assessee was entitled to invoke Rule 27 of the

Rules in the present case?

6. The Tribunal while adjudicating the issue against the assessee

had noticed in its order dated 30.8.2013, Annexure A.3 that the dispute was

relating to three sales bills amounting to ` 37,30,300/- under which alleged

cash sales were made. There was no mention of any quantity sold. The

name of the parties to whom the goods were sold was also missing. There

was totalling errors in each bill and the mode of transportation of those

goods also could not be explained by the assessee. On consideration of

entire material on record, it was concluded that the genuineness of the

transaction could not be established. The Tribunal was, thus, justified in

sustaining the addition of ` 37,30,300/- as unexplained sales..

 

10. It may be noticed that where the respondent is aggrieved against any disallowance or addition sustained by the CIT(A) which is not

under challenge at the behest of the appellant, the only remedy available

with the respondent is to either file separate appeal or agitate the issue by

way of cross objections in the appeal filed by the appellant impugning the

disallowance or the addition sustained. Thus, no error could be pointed out

by learned counsel for the respondent-assessee in the approach of the

Tribunal which may warrant interference by this Court under Section 260A

of the Act. The Tribunal had rightly not allowed the assessee to urge relating

to disallowance of expenditure under Section 40(a)(ia) of the Act and part

disallowance out of car expenses, car depreciation and telephone expenses.

11. In view of the aforesaid findings, no substantial question of law

arises. The appeal stands dismissed

 

IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of Decision: August 25, 2014

+ ITA 188/2014

THE AJAY G. PIRAMAL FOUNDATION

 

The Tribunal by the impugned order has held that the revised

computation filed by the assessee during the course of the

assessment proceedings and their submission that they were

withdrawing the revised return should have been accepted in view

of decisions in NTPC vs. CIT [1998] 229 ITR 383, Jute

Corporation of India Ltd. vs. CIT [1991] 187 ITR 688 (SC), CIT

vs. Jai Parabolic Springs Ltd. [2008] 306 ITR 42 (Delhi), CIT vs.

Pruthvi Brokers & Shareholders [2012] 349 ITR 336 (Bom.),

Balmukund Acharya vs. DCIT [2009] 310 ITR 310 (Bom.) and

some decisions of the Tribunal. It was further held that in the

present case the shares which were transferred or gifted to the

respondent assessee were to form part and parcel of the corpus of

the trust and therefore Section 11(1)(d) was applicable. Further

proviso (iia) to Section 13(1)(d) would protect the assessee in

respect of the assessment year in question. Thus, addition of

Rs.42,41,32,500/- was deleted.

Thus there cannot be any doubt or debate, that the claim and

submission could have been raised by the respondent assessee

before the appellate authorities. In either way, the issue has been

rightly decided in favour of the respondent-assessee.