TaxTMI 
TaxTMI 
2024 (1) TMI 213
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....e AY 2014-15 in the case of Shri Reddy Veeranna is with regard to framing assessment order u/s 143(3) r.w.s. 153A of the Act is bad in law and void-ab-initio, since there was no valid search conducted in the premises of assessee. 3. Facts narrated in the case of Shri Reddy Veeranna in assessment year 2010-11 are as follows: 3.1 There was a search action u/ 132 of the Act conducted in the case of Shri Reddy Veeranna at No.109, 10th Main, 7th Cross, RME Extension, 2nd Stage, Bangalore on 7.1.2015 in connection with search proceedings in the group cases of M/s. Reddy Veeranna Constructions Pvt. Ltd. Consequent to this search action, notice u/s 153A of the Act was issued to the assessee on 17.11.2015 to file a return of income within 30 days from the date of receipt of notice. The assessee has filed a letter dated 28.12.2015 stating that the return was filed originally on 31.11.2011 to be treated as income declared u/s 153A of the Act. However, the assessee has not paid self-assessment tax on the income declared in it at Rs. 8,72,94,285/-. Therefore, notice has been issued to the assessee on 15.11.2016 to pay the tax within 5 days from the date of receipt of the notice. However, the ....
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....mus to go into the question of validity of search under Section 132 of the Act and it would be incongruous and not in deference to the pendency of aforesaid Civil Appeal No.2734/2013before the Hon'ble Supreme Court. (ii) That even the law has been amended by insertion of the aforesaid Explanation by Parliament in Section 132 of the Act by the Finance Act, 2017 with retrospective effect from 1.4.1962. That Explanation also prohibits the Appellate Authorities to go into the reasons recorded by the concerned Income Tax Authority for directing Search against the assessee or tax- payer. (iii) That this Amendment came after both, ITAT passed the order in the present case on 21.11.2014 as also the learned CIT(A) passed the impugned order aji 11.2.2015. Nonetheless, retrospective effect of the said amendment, will have its effect on the present case as well so long that the said Amendment holds the field Therefore, the Appellate Authorities of the Department cannot be expected to go into the said question. It is only for the Constitutional Courts to examine the vires and validity of such Amendment and for that, a separate writ petition is already said to be pending. However, no suc....
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....s filed the letter requesting to treat the original return filed as a return in response to notice u/s. 153A of the Act, on 28/12/2015. Thus, the assessee has filed the return of income within the time allowed by the A.O. in the notice issued. 4.4 Further, he submitted that the aforesaid assessment years i.e., 2010-11 & 2012-13 are unabated assessments, as on the date of initiation of search, there were no assessment proceedings pending and time limit for issuance of notice u/s 143[2] of the Act had also expired. Thus, the scope of these unabated assessments is restricted to making any additions solely based upon incriminating material found at the time of search. 4.5 He submitted that as can be seen from the assessment orders passed, there are no additions made to the income declared by the assessee as per the original return of income filed u/s. 139 of the Act, which income has been retained in the return filed in response to notice u/s. 153A of the Act. 4.6 Consequently, there is no dispute that the assessment order passed u/s. 153A r.w.s. 143[3] has to be in consonance with the intimation passed u/s. 143[1] of the Act and there cannot be any variation either in the total inc....
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.... of Hon'ble Apex Court in the matter of KOHLAPUR CANESUGAR WORKS LTD. v. UNION OF INDIA reported in [TS-5120-SC- 2000-0] whereunder Apex Court has examined the effect of repeal of a statute visa-vis deletion/addition of a provision in an enactment and its effect thereof. The import of Section 6 of General Clauses Act has also been examined and it came to be held: "37. The position is well known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute-book as completely as if it had never been passed, and the statute must be considered as a law that never existed. To this rule, an exception is engrafted by the provisions of Section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it" cannot be granted afterwards. Savings of the nature contained in Section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In....
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....wed to file the return of income and realization of revenue without undue compliance burden on the tax payer. Consequently, the omission of the said clause that cast an undue burden on the tax payer was a measure taken to alleviate hardship caused to the taxpayer. It is in the nature of a beneficial legislation to provide relief to the taxpayer. Such provisions enacted with an object of rationalizing a provision or to remove hardships and give relief to the tax-payer has to be given effect retrospectively. 4.11 He placed reliance on the decision of the Hon'ble Supreme court in the case of CIT Vs. Calcutta Export Company, [2018] 404 ITR 654 [SC], for the proposition that any provision which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section, is required to be read into the section to give the section a reasonable interpretation and requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. As per the Explanatory Notes to the Finance Act, 2016, the object for omitting the clause [aa] to Explanation to sub-section [9] of ....
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....urn of income to be filed in response to notice u/s. 153A of the Act and not the entire provisions of section 139, which has been specifically over-ridden in the first part of the section. At this juncture, the scope of the assessment to be made u/s. 153A of the Act is relevant. These are special provisions for making an assessment or reassessment as a result of search. As already pointed out, the assessment for the AY 2010-11 and 2012-13 are unabated assessments. 4.14 He submitted that the scope of the assessment is only to make additions if any on the basis of the incriminating material found in course of search. Thus, the necessary implication that arises is that the reference to the provisions of section 139 "so far as may be" in the provisions of section 153A of the Act is only to make applicable, the nature of the form to be filed, the manner of verification and other particulars to be furnished in the return of income to be filed u/s. 153A. Merely because of the phrase "so far as may be" employed in section 153A of the Act, the operation of the entire section 139, including the provisions of section 139[9] of the Act cannot be presumed. In other words, provisions of section....
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.... returns filed in response to notice under Section 153A of the Act, this argument of the appellant is also totally misplaced. The applicability of Section 139 of the Act is there as soon as a notice is issued under Section 153A of the Act and the same is clearly provided in this Section. He submitted that considering above the action of the AO was upheld by the ld. CIT(A). 6. We have heard the rival submissions and perused the materials available on record. The contention of the ld. A.R. is that the returns of the assessee for these assessment years i.e. 2010-11 & 2012-13 in case of Shri Reddy Veeranna and Assessment year 2015-16 in case of Smt. Reddy Sangeetha as a defective return by placing reliance as per clause (aa) to Explanation to sub-section (9) of section 139 of the Act, which has been inserted in the Finance Act, 2013 w.e.f. 1.6.2013. However, this clause (aa) to explanation to section 139(9) of the Act was omitted by the Finance Act, 2016 w.e.f. 1.4.2017 and the contention of the ld. A.R. is that the effect of refilling a statute or deleting a provision is to obliterate it from the statute book as completely as if it had never been passed, and the statute considered as....
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.... of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. Savings of the. nature contained in Section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case where a particular provision in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceedings shall not continue but fresh proceedings for the same purpose may be initiated under the new provision." 6. In fact coordinate bench under similar circumstances had examined the effect of omission of sub-section (9) to Section 10B of the Act w.e.f. 01.04.2004 by Finance Act, 2003 and held that there was no saving clause or provision introduced by way of amendment by omitting sub-section (9) of Section 10B. In the matter of GENERAL FINANCE CO. vs. ACIT, which judgment has also been taken note....
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....ment has been made in pursuance of provisions of clause (i) of section 92BA of the Act, which reads as under: "(i) Any expenditure in respect of which payment has been made or is to be made to a person referred in clause (b) of said section 2 of section 40A". 6.2 Section 92BA of the Act was inserted by Finance Act, 2012 w.e.f. 1.4.2013. However, clause (i) referred above was omitted by Finance Act, 2017 w.e.f. 1.4.2017. As such reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of section 92BA of the Act is not valid as the said provision has been omitted and deleted the addition relating to the specified domestic transaction made u/s 92CA of the Act. While coming to this conclusion, the coordinate bench also taken note of the order of the Tribunal Mumbai Bench in case of Fire Menich Aromatics India Pvt. Ltd. Vs. ACIT in ITA No.348/Mum/2014 dated 15.7.2020, wherein held as under: "13. We have heard the submissions of the learned authorised representative (ld AR) for the assessee and the learned Departmental Representative (ld. DR) for the revenue and deliberated on the case laws relied on behalf of the assessee. It is an admitted positio....
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....n, unless it is otherwise expressly provided any (appointment notification,) order, scheme, rule, form or bye-law, (made or) issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions reenacted, continue in force and be deemed to have been (made or) issued under the provisions so re-enacted, unless and until it is superseded by any (appointment, notification,) order, scheme, rule, form or bye-law, (made or) issued under the provisions so re-enacted (and when any (Central Act) or Regulation, which, by a notification under Section 5 or 5A of the Scheduled Districts Act, 1874, (14 of 1874) or any like law, has been extended to any local area, has, by a subsequent notification, been withdrawn form the re-extended to such area or any part thereof the provisions of such Act or Regulations shall be deemed to have been repealed and re-enacted in such area or part within the meaning of this Section). 14. A careful reading of section 6 of General Clauses Act (this Act) makes it clear that made after the commencement of General Clauses Act, any Central Act or Regulation repeals any enactment hitherto made or hereafter to be made, then, unless a ....
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....epeal'. It is also held that there is no real distinction between an amendment and that "amendment" is in fact a wider term which includes deletion of the provision in an existing statue. 18. The Hon'ble Court in M/s. Shree Bhagwati Steel Rolling Mills (supra) in a later decision, while referring its order in Fibre Board Private Ltd (supra) held that omission would amount to repeal. "On the argument of the contesting parties that the omitted provision being treated as it never existed as per section 6 of General clauses Act would not apply to allow the previous operation of the provisions is omitted or anything done or suffered thereunder. Nor may a legal proceeding in respect of any rights and liability acquired or incurred under the enactment so omitted." The Hon'ble Apex Court took a view that in majority of the cases, this would cause great public mischief, and that the decision in Fibre Board case was therefore clearly delivered by their lordship for the public good, being, at the least reasonably possible view and that no aspect of the question at their hand was remained unnoticed in Fibre Board Case.(emphasis added by us) 19. With the aforesaid legal back ground and with....
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.... to have laid down any ratio decidendi on an interpretation of the word "repeal" an "omission" would not be included. Their observations are in the nature of obiter dicta as held by the Supreme Court in Fibre Boards. It is also held that the earlier decisions have not referred to Section 6A of the General clauses Act and they lose their binding effect on an application of the "per incuriam" principle, as held by the Supreme Court in the case of Fibre Boards Private Limited. Thus, in our view the decision rendered in Royala Corporation Pvt. Ltd lacks binding value for the reasons discussed by the Apex Court in Fibre Boards Pvt. Ltd, the decision rendered in the case of Kolhapur Cane Sugar Works Ltd as also in the case of General Finance Company following the decision in Royala Corporation Ltd, loses its binding value. 17. As we have already noted that the Hon'ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills again reiterated that repeal would include repeal by way of an express omission. The Supreme Court further held that the decision in Fibre Boards Private Limited clarifies the law in holding than an omission would amount to repeal. As a result, the provis....
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....as already declared as per-in curium. Similarly, the decision in General Finance Co (supra) is based on Rayala Corporation P. Ltd Vs Director of Enforcement (supra) and Kolhapur Canesugar Works Ltd Vs Union of India (supra). Considering the aforesaid legal position and the dates of various judgments of the Hon'ble Apex Court, we are of the view that the ld. AR for the assessee has referred and relied on the decisions of General Finance Company Vs ACIT (supra) which have been declared as per-in curium by Hon'ble Apex Court. 21. We are conscious of the facts that the latest law declared by Hon'ble Apex Court in various cases (supra) was not confronted with the ld. AR for the assessee; however, it is always presumed that the law declared by the Court is in the knowledge of the legal practitioner. We instead of going in further discussions are of the view that in view of the decision of Hon'ble Apex Court in Fibre Boards (P) Ltd (supra), the word 'repeal' includes 'omission'. Thus, we do not find any merit in the objection raised by the ld. AR for the assessee which we are rejecting, being without any merit and held that appeal filed by the revenue with in currency of the sub-section....
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....d. 7. Next common ground No.6 in the three appeals i.e. ITA No.1145/Bang/2022 for the AY 2010-11 & ITA No.1112/Bang/2022 for the AY 2012-13 in the case of Shri Reddy Veeranna and in ITA No.1111/Bang/2022 for the AY 2015-16 in the case of Smt. Reddy Sangeetha is with regard to levy of interest u/s 234A of the Act from the date of filing return of income till the date of passing assessment order i.e. from 31.1.2011 to 27.12.2016 in assessment year 2010-11 and from 16.5.2013 to 27.12.2016 for the assessment year 2012-13 and in the assessment year 2015-16, the ld. AO is not justified in levying the interest u/s 234A of the Act till the date of passing assessment order i.e. 26.12.2016 without appreciating that assessee had filed her return of income on 25.8.2016 itself. 8. We have heard both the parties and perused the materials available on record. These grounds are not emanated from the order of the ld. CIT(A). As seen from the impugned orders of the CIT(A) in these two cases in these three assessment years i.e. 2010- 11, 2012-13 & 2015-16, there was no ground on this issue by assessees before CIT(A). Hence, we are refrained to adjudicate these grounds as it is not emanated from the....
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....interest free advance to these parties. Hence, it should be considered that assessee has used the borrowed funds from Vysya Co-operative Bank to advance these parties on which assessee claimed interest in its profit & loss account in the assessment yar under consideration at Rs. 34,80,353/-, which cannot be allowed u/s 36(1)(iii) of the Act, since the loan has been borrowed for the purpose of business and not satisfy the conditions laid down in section 36(1)(iii) of the Act. Accordingly, the disallowance made by the lower authorities is justified. This ground of appeal of the assessee is dismissed." 11.2 Accordingly, this ground is dismissed. 12. In ITA No.1111/Bang/2022 for the AY 2015-16 in the case of Smt. Reddy Sangeetha, the assessee has raised one more ground that the ld. AO has erred in computing the interest u/s 234B of the Act without giving credit to the self-assessment tax paid by the assessee on 24.12.2015. 12.1 After hearing both the parties, we direct the ld. AO to give credit to the self-assessment tax paid, if any on 24.12.2015 while computing the interest u/s 234B of the Act. 13. In the result, the appeal of the assessee in ITA No.1111/Bang/2022 for the AY 2015....
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....yata Developers (P) Ltd [MDPL] for the purchase of this land from SIDPL. The assessee is a Director in MDPL also. The transactions took place in Dec 2013/ January, 2014. The assessee never filed any income tax return for AY 2014-15. The reason for the same was stated at the time of search to be financial crunch leading to his inability to pay self-assessment tax of Rs 1,72,42,542/-. However, after the search the assessee claimed a loss of Rs 8,62,27,931/-, as business loss to him arising out of sale of land to MDPL by SIDPL. For this he worked out the cost of this land as Rs 55,18,27,931/- being based on total cost of land of 200 acres estimated at Rs 247,51,89,062/- (so average cost per acre at Rs 1,05,15,385/-). The land was sold by SIDPL to MDPL for Rs 46,56,00,000/-. As such the assessee worked out his own loss at Rs 8,62,27,931/-. 14.3 In this regard, the ld. CIT(A) observed that the assessee had only taken over the rights and interests of EREPHPL in SIDPL. So he had just substituted himself in the books of SIDPL against EREPHPL, which was earlier lender to SIDPL. As regards the sale of land, the transaction was between SIDPL (a separate legal entity) and MDPL; and any profit....
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....For short "MDPL") as the purchaser for the said land. The land transferred under this transaction is located at the end of the site of the project. M/s. MDPL was not willing to pay more than the market value as they are not sure of SIDPL fulfilling their promise to registering remaining 200 acres of contiguous land. In fact as on 31.3.2015, the position of registration is the same as on 31.3.2014. In view of this reason, the cost of land to Mr. Reddy Veeranna on a average is higher than the market value of the land acquired by MDPL. Mr. Reddy Veeranna has incurred loss on this count. Further, he submitted that the AO agreed that there was a contractual obligation, which forced Mr. Reddy Veeranna to buy the land held by SIDPL and he observed that this is a genuine loss on the face of it. However, he observed that there was no reason to Mr. Reddy Veeranna to nominate MDPL as buyer on his behalf and incurred a loss. According to ld. A.R., the AO cannot justifiably claim to put himself in the arm chair of the business man and assume the role to decide too much is reasonably the act of assessee so as to maximize income of the assessee from business. 15. The ld. D.R. relied on the order....
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....f view but that of a prudent business man. This is the contractual obligation imposed on the assessee and he has to discharge the same in the interest of his business. No business man can be compelled to maximize his profit. The revenue authorities must put themselves in the shoes of the assessee and see how a prudent business man would act. The assessee, being a prudent business man to keep up his promise, he incurred this liability. As he is able to find out a new party i.e. MDPL the sale was at the value fixed by State Government for the purpose of payment of stamp duty in respect of that impugned property and in that course of action, the loss suffered by the assessee to be allowed as a genuine business loss and accordingly, we direct the ld. AO to allow this loss while computing the income of the assessee. This ground of assessee is allowed. 17. Next ground in ITA No.1146/Bang/2022 for the AY 2015-16 is with regard to addition of Rs. 2,76,31,482/- u/s 28(iv) of the Act. 17.1 Facts of the case relate to the common issue of the action of the AO in making an addition of Rs. 2,76,31,482/-. In brief, it was observed by the AO that during search in the case of M/s Reddy Veeranna C....
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....ither be treated as 'Salaries' in the company's account or as 'fees for professional or technical Services' in the company's account. So, in either case the assessee has benefitted by an amount of Rs. 2,76,31,482/- as the preponderance of probability is that the amount could not have been given by RVCPL to its employees without keeping a proper record of the same and that all such employees could not have left the job without rendering proper accounts. So, he observed that in actual the assessee, who was in full control of the affairs of the company, had drawn money for his own benefit and the same would amount to income in his hand either as salary or as business/profession income. For the above reasons, the ld. CIT(A) upheld the action of the AO in making an addition of Rs. 2,76,31,482/- and dismissed the grounds. 18. We have heard the rival submissions and perused the materials available on record. In this case, there was search in the case of Mr. Reddy Veeranna u/s 132 of the Act wherein cash balance was found as per cash book of RVCPL at Rs. 17,26,31,482/- .The investigating authority questioned the General Manager, Director and the Managing Director o....
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....ed shall arise from the business or profession. Also, in order to invoke the provision of Section 28 (iv) of the IT Act, the- benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of Rs. 57,74,064/- is having received as cash receipt due to the waiver of loan. Therefore, the very first condition of Section 28 (iv) of the IT Act which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. Hence, in our view, in no circumstances, it can be said that the amount of Rs 57,74,064/- can be taxed under the provisions of Section 28 (iv) of the IT Act." 18.3 Similar view has also been laid down in the following judgments: (i) CIT vs. Santogen Silk Mills Ltd. [(2015) 57 taxmann.com 208 (Bombay HC)] (ii) CIT vs. Xylon Holdings (P.) Ltd. [(2012) 26 taxmann.com 333 (Bombay HC)] (iii) Ravinder Singh vs. CIT [(1993) 71 Taxman 336 (Delhi HC] (iv) Mahindra & Mahindra Ltd. vs. CIT /(2003) 128 Taxman 394 (Bombay HC)] (v) DCIT vs. Tosha International Ltd. [(2008) .116 TTJ 941 (....