Just a moment...

⚠✕
❮ Top
☎ Help
☰
×

By creating an account you can:

Logo TaxTMI
Keyword Search :
AI Tools : New
Ask tax questions in natural language. Powered by AI trained on the TaxTMI legal database. Use AI Tools ➞
Call Us / Help / Feedback✕

Contact Us At :

✉ E-mail: [email protected]

✆ Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
Make Most of Text Search ✕
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
    6. Text Search
  6. The system will try to fetch results that contains ALL your words.
  7. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
    8. Text Search
╳
Add to...
You have not created any category. Kindly create one to bookmark this item!
✕
Create New Category
Hide
Title :
Description :
❮❮ Hide
❮ Default View
Expand ❯❯
Close ✕
🔎 TMI Notes - Adv. Search ❯
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text ❯
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws----❯
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ---- ❯
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
RelevanceDefaultDate
    Act RulesBills
    Understanding the Business Loss Carry Forward Provisions in Clause 112 of the Income Tax Bill, 2025 ...
    Act RulesBills
    Understanding the Carry Forward of House Property Losses in Clause 110 of Income Tax bill, 2025 Vs. ...
    Act RulesBills
    Addresses the set-off of losses under various heads of income In Clause 109 of Income Tax Bill, 2025...
    Act RulesBills
    Understanding Loss Set-Off or carry forward and set-off of losses in Clause 108 of the Income Tax Bi...
    Act RulesBills
    Tax treatment of amounts borrowed or repaid through instruments like hundis in Clause 106 of the Inc...
    Act RulesBills
    Taxation of Unexplained Expenditures in Clause 105 of Income Tax Bill, 2025 Vs. Section 69C of Incom...
    Act RulesBills
    Addressing the issue of undisclosed income through unexplained assets In Clause 104 of the Income Ta...
    Act RulesBills
    Understanding the Legal Framework for Unexplained Investments in Clause 103 of the Income Tax Bill, ...
    Act RulesBills
    A Deep Dive into Unexplained Asset in Clause 104 of Income Tax Bill, 2025 Vs. Section 69A of Income ...
    Act RulesBills
    Understanding Unexplained Investments Taxation in Clause 103 of Income Tax Bill, 2025 Vs. Section 69...
    Act RulesBills
    Curb tax evasion through Unexplained Credits (i.e. unaccounted money or fictitious entries in financ...
    Act RulesBills
    Income Apportionment in AOPs and BOIs in Clause 309 of the Income Tax Bill, 2025 Vs. Section 67A of ...
    Act RulesBills
    Comprehensive Analysis of Total Income in Clause 101 of the Income Tax Bill, 2025 Vs. Section 66 of ...
    Act RulesBills
    Addresses the tax liability of individuals in respect of income that is included in the income of an...
    Act RulesBills
    Prevent tax evasion through the diversion of income to family members "clubbing of income" in Clause...
    Act RulesBills
    Definitions for "transfer" and "revocable transfer" in Clause 98 of the Income Tax Bill, 2025 Vs. Se...
    Act RulesBills
    The chargeability of income in the context of the transfer of assets with Exception in Clause 97 of ...
    Act RulesBills
    Prevention of tax avoidance strategies "transfer of income without a corresponding transfer of the a...
    Act RulesBills
    Understanding the Tax Implications on benefits obtained from the remission or cessation of liabiliti...
    Act RulesBills
    Disallowing deductions of specific expenses in Clause 94 of Income Tax Bill, 2025 vs. Section 58 of ...
❮
❯
❯❯
MaximizeMaximizeMaximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

    +

    Are you sure you want to delete "My most important" ?

    NOTE:

    Open Link
    Notes
    Showing Results for :
    Reset Filters
    Results Found:
    Show All SummariesHide All Summaries
    Act RulesBills
    Understanding the Business Loss Carry Forward Provisions in Clause 112 of the Income Tax Bill, 2025 ...
    Show AI Summary
    Carry forward of business losses allows set off against future business income, prioritised before other carried allowances.
    Clause 112 permits carry forward and set off of unabsorbed business losses-defined as losses under "Profits and gains of business or profession" excluding speculation losses-against future business or professional profits, mandates that such losses be set off before any other carried forward allowances, and limits the period during which losses may be carried forward, aligning with the existing temporal framework.
    Act RulesBills
    Understanding the Carry Forward of House Property Losses in Clause 110 of Income Tax bill, 2025 Vs. ...
    Show AI Summary
    Carry forward of house property loss - allows head-specific set off against future house property income, time-limited.
    Clause 110 permits unabsorbed losses under the head "Income from house property" to be carried forward and set off only against future income from the same head, subject to a statutory time limitation, and defines "unabsorbed loss from house property" as losses not set off against other income heads in the relevant year.
    Act RulesBills
    Addresses the set-off of losses under various heads of income In Clause 109 of Income Tax Bill, 2025...
    Show AI Summary
    Set-off of losses: new limits bar using business and capital losses to reduce salary and other non-capital income.
    Clause 109 permits set-off of losses under any income head except capital gains against income from other heads in the same year, subject to limits: business losses cannot be set off against salary income; house property losses are set off against other heads only up to a capped amount; and capital gains losses cannot be set off against non-capital income. The clause thus confines capital losses within their category and imposes head-specific restrictions requiring careful tax planning and record-keeping.
    Act RulesBills
    Understanding Loss Set-Off or carry forward and set-off of losses in Clause 108 of the Income Tax Bi...
    Show AI Summary
    Set-off of losses under the same head: clarifies offset rules for capital and non-capital income, refining capital gains set-off.
    Clause 108 permits set-off of a loss from any source against income from any other source under the same head (excluding capital gains), while treating capital gains losses separately: long-term capital losses may be set off only against other long-term capital gains, and short-term capital losses may be set off against gains from any capital asset, thereby requiring accurate classification of assets and records to effect permissible intra-head offsets.
    Act RulesBills
    Tax treatment of amounts borrowed or repaid through instruments like hundis in Clause 106 of the Inc...
    Show AI Summary
    Deemed income from informal credit instruments: non account payee transactions treated as taxable, prompting formalisation of payments.
    Clause 106 and Section 69D deem amounts borrowed or repaid through hundis, negotiable instruments, or Board specified modes to be the income of the borrower or repayer when not transacted by account payee cheque, with provisions capturing interest where applicable and safeguards to prevent double taxation once an amount has been treated as income.
    Act RulesBills
    Taxation of Unexplained Expenditures in Clause 105 of Income Tax Bill, 2025 Vs. Section 69C of Incom...
    Show AI Summary
    Unexplained expenditure treated as income increases tax exposure when taxpayers fail to satisfactorily explain expenditure sources.
    Clause 105 deems unexplained expenditure as income when an assessee fails to provide a satisfactory explanation, confers evaluative power on the Assessing Officer to judge adequacy of explanations, and disallows any deduction for amounts so deemed; Section 69C operates similarly but uses permissive language and contains a deduction proviso, reflecting comparable objectives to prevent tax evasion while differing in textual strictness and potential administrative effect.
    Act RulesBills
    Addressing the issue of undisclosed income through unexplained assets In Clause 104 of the Income Ta...
    Show AI Summary
    Unexplained asset rules now include virtual digital assets, expanding deeming powers where explanations are unsatisfactory.
    Where an asset is unrecorded or its recorded amount is less than actual value and the assessee fails to provide a satisfactory explanation, Clause 104 and Section 69B treat the unexplained excess as deemed income for the year of discovery; Clause 104 expressly adds virtual digital assets, while both provisions vest the Assessing Officer with discretion to accept or reject explanations, creating valuation and verification challenges.
    Act RulesBills
    Understanding the Legal Framework for Unexplained Investments in Clause 103 of the Income Tax Bill, ...
    Show AI Summary
    Unexplained investments treated as income when taxpayer fails to satisfactorily explain source, shifting burden to taxpayer and empowering assessing officer discretion.
    Clause 103 deems unrecorded investments or amounts exceeding recorded investment as income if the assessee fails to provide a satisfactory explanation to the Assessing Officer; the provision places the evidential burden on the assessee and employs a deeming mechanism to include unexplained amounts in taxable income. Section 69B applies the same explanation-and-deeming approach to investments, bullion, jewellery and other valuable articles where recorded amounts are less than actual expenditure, relying on Assessing Officer evaluation to determine whether excess amounts are to be treated as income.
    Act RulesBills
    A Deep Dive into Unexplained Asset in Clause 104 of Income Tax Bill, 2025 Vs. Section 69A of Income ...
    Show AI Summary
    Unexplained assets treated as deemed income: inclusion of virtual digital assets broadens taxable asset coverage and disclosure obligations.
    Clause 104 deemsthe value of assets not recorded, or under recorded, in an assessee's books to be taxable income where the assessee fails to provide a satisfactory explanation; it expressly includes virtual digital assets and places onus on the assessee to prove the nature and source, leaving determination of adequacy to the Assessing Officer.
    Act RulesBills
    Understanding Unexplained Investments Taxation in Clause 103 of Income Tax Bill, 2025 Vs. Section 69...
    Show AI Summary
    Unexplained investments deemed income under deeming provision; imposes explanation burden and increased tax scrutiny on taxpayers.
    Clause 103 treats investments not recorded in the assessee's books, and amounts exceeding recorded investments, as unexplained unless the assessee provides a satisfactory explanation; such unexplained investments are deemed income for the relevant tax year, subject to the Assessing Officer's evaluation under the clause's deeming provision.
    Act RulesBills
    Curb tax evasion through Unexplained Credits (i.e. unaccounted money or fictitious entries in financ...
    Show AI Summary
    Unexplained credits: dual-party explanation requirement leads to inclusion of unexplained book credits as taxable income.
    Unexplained credits are chargeable to income when sums in an assessee's books lack satisfactory explanation, with the assessing officer determining adequacy. Loans and borrowings require satisfactory explanations from both the assessee and the creditor; share application money, share capital and share premium in closely held companies similarly demand corroboration from the company and the named contributor. Venture capital funds and companies receive a specific exemption, while the provision overall increases recordkeeping and evidentiary burdens and enhances tax authority scrutiny.
    Act RulesBills
    Income Apportionment in AOPs and BOIs in Clause 309 of the Income Tax Bill, 2025 Vs. Section 67A of ...
    Show AI Summary
    Income apportionment in AOPs and BOIs: structured deduction and allocation of member remuneration and interest for tax computation.
    Both Clause 309 and Section 67A set out a structured method for computing a member's share in an AOP/BOI: deduct interest, salary, bonus, commission or remuneration from total AOP/BOI income, apportion the residual among members by entitlement and treat apportioned shares under the same heads of income; where apportioned results are profitable the remuneration is added back, and where loss it is adjusted; interest on capital borrowed by a member for investment is deductible under Profits and gains of business or profession; "paid" means actually paid or incurred per the accounting method used.
    Act RulesBills
    Comprehensive Analysis of Total Income in Clause 101 of the Income Tax Bill, 2025 Vs. Section 66 of ...
    Show AI Summary
    Total income aggregation requires inclusion of exempt receipts to protect the tax base and prevent erosion through exclusions.
    Clause 101 mandates that computation of Total income include income exempt under the identified sub part of Chapter provisions, converting such exempt receipts into an affirmative component of total income to protect the tax base and prevent erosion from otherwise excluded income streams.
    Act RulesBills
    Addresses the tax liability of individuals in respect of income that is included in the income of an...
    Show AI Summary
    Income attribution: clarifies tax liability of the legal owner and joint-and-several responsibility for income included in another's return.
    Clause 100 assigns tax liability to the person in whose name an asset stands or whose firm membership produces attributed income, imposes joint and several liability for jointly held assets allowing recovery from any co-owner for the whole tax due, applies existing procedural recovery mechanisms to enforce the liability, and overrides contrary provisions in other laws to ensure primacy in determining tax obligations arising from income attribution.
    Act RulesBills
    Prevent tax evasion through the diversion of income to family members "clubbing of income" in Clause...
    Show AI Summary
    Clubbing of income: new clause expands inclusion of spouse, minor child and transferred-asset income in assessee's taxable income.
    Clause 99 attributes to the individual income arising to a spouse from employment or remuneration in concerns where the individual has a substantial interest, income from assets transferred to a spouse or a son's wife without adequate consideration, and income of a minor child except earnings from the child's manual work or personal skill; it also prescribes a formula for income attributable when transferred assets are invested and treats conversion of individual property to HUF as income of the individual.
    Act RulesBills
    Definitions for "transfer" and "revocable transfer" in Clause 98 of the Income Tax Bill, 2025 Vs. Se...
    Show AI Summary
    Revocable transfer definitions broaden tax reach, treating arrangements that preserve transferor control as attributable income to transferor.
    Clause 98 of the Income Tax Bill, 2025 and Section 63 of the Income Tax Act define transfer to include settlements, trusts, covenants, agreements or arrangements, and define revocable transfer to cover provisions enabling direct or indirect re transfer of income or assets or re assumption of power by the transferor. Both provisions attribute income to the transferor where economic substance shows retention of control or benefit, broadening the tax net over arrangements that preserve transferor influence.
    Act RulesBills
    The chargeability of income in the context of the transfer of assets with Exception in Clause 97 of ...
    Show AI Summary
    Chargeability of income in asset transfers: revocable transfers taxed to transferor, with narrow irrevocable-transfer exceptions.
    Clause 97 treats income from a revocable transfer of assets as taxable in the hands of the transferor, while providing exceptions for truly irrevocable transfers where the transferor derives no direct or indirect benefit; if a power to revoke later arises the income becomes chargeable to the transferor, thereby aligning taxation with economic control and preventing tax avoidance through strategic transfers.
    Act RulesBills
    Prevention of tax avoidance strategies "transfer of income without a corresponding transfer of the a...
    Show AI Summary
    Transfer of income without asset transfer: such income is taxed in the transferor's hands to prevent tax avoidance.
    Clause 96 and Section 60 provide that income arising by virtue of a transfer, whether revocable or irrevocable and irrespective of timing, is chargeable to tax in the transferor's hands if the asset generating that income has not been transferred, thereby preserving the link between income and its source asset to prevent tax avoidance.
    Act RulesBills
    Understanding the Tax Implications on benefits obtained from the remission or cessation of liabiliti...
    Show AI Summary
    Remission of liabilities taxable - forgiven debts and other benefits must be included as income when received under revised charge rules.
    Clause 95 of the Income Tax Bill, 2025, treats any benefit obtained from the remission or cessation of a liability for which a deduction was previously allowed as taxable in the year received, applying principles from Section 38(1)(a) to non business income heads. Section 59 of the Income tax Act, 1961, applies Section 41(1) similarly to ensure forgiven liabilities are included in taxable income, but both provisions present valuation and timing ambiguities for non cash benefits and assessment year determinations.
    Act RulesBills
    Disallowing deductions of specific expenses in Clause 94 of Income Tax Bill, 2025 vs. Section 58 of ...
    Show AI Summary
    Disallowance of deductions: withholding compliance ties deductibility for cross border payments and personal expenses.
    Clause 94 disallows deductions from income from other sources for personal expenses and for interest or salaries payable outside India where tax has not been paid or deducted under the withholding framework; it extends selected business-income deduction rules to other sources, prescribes computation rules for foreign companies, disallows deductions for gambling and lotteries while excepting horse racing maintenance, and links deductibility to compliance with withholding obligations.

    TMI Notes

    Back

    All TMI Notes

    Showing Results for :
    Reset Filters
      No Records Found

      TMI Notes

      Home› TMI Notes › Indian Laws › Case-Laws › Category › This
      Back

      All TMI Notes

      whatsappJoin Channel
      Showing Results for : Reset Filters
      Indian Laws

      Ensuring Fair Procedure before declaring Fraud in Bank Loan: Providing Relevant Documents and Opportunity to be Heard

      10 August, 2024

      Contents
      Acts
      Plus +
      Summary
      Note

      Note

      -

      Bookmark

      Print

      Print

      Print Options

      Deciphering Legal Judgments: A Comprehensive Analysis of Case Law

      Reported as:

      2024 (5) TMI 1323 - DELHI HIGH COURT

      Introduction

      The judgement under analysis pertains to a writ petition filed by an ex-director and guarantor of a company (hereinafter referred to as "the Petitioner") against various banks (hereinafter referred to as "the Respondents"). The Petitioner challenged the Show Cause Notices (SCNs) issued by the Respondents for declaring the account of the company as 'Fraud'. The crux of the matter revolved around the alleged non-compliance with the agreed terms of the loan documents and various irregularities in the loan account, leading to suspicion of fraudulent activities.

      Arguments Presented

      Petitioner's Arguments

      The Petitioner contended that the SCNs were issued without providing the requisite documents, which formed the basis of the allegations. The Petitioner argued that the absence of such documents rendered it impossible to submit a proper reply to the SCNs. The Petitioner highlighted the following key points:

      Respondents' Arguments

      The Respondents contended that the requisite documents had already been provided to the Petitioner. The lead bank, State Bank of India (SBI), submitted that it was ready to grant an inspection of the company's records available with it. Additionally, the Respondents argued that:

      • No final decision had been taken by the banks, and only SCNs had been issued at this stage.
      • The judgments relied upon by the Petitioner were not applicable to the present case, and they did not provide for granting a personal hearing to the Petitioner.
      • The Respondents relied on the Supreme Court's order in Rajesh Agarwal's case to contend that granting a personal hearing by the banks was not mandatory.

      Discussions and Findings of the Court

      The Court discussed the settled principles of law regarding the applicability of the Principles of Natural Justice and the requirement to provide relevant documents forming the basis of a SCN. The Court relied on the Supreme Court judgments in Kanwar Natwar Singh & Kanwar Jagat Singh Versus Directorate of Enforcement - 2010 (10) TMI 156 - Supreme Court and T. Takano v. Securities and Exchange Board of India to emphasize the importance of disclosing relevant materials to enable an effective reply.

      The Court also referred to the Supreme Court's decision in State Bank of India v. Rajesh Agarwal, which held that the classification of an account as 'Fraud' under the Reserve Bank of India's Master Directions on Frauds leads to a credit freeze for the borrower. Consequently, the Principles of Natural Justice must be followed, and the borrower should be given an opportunity to be heard before classifying the account as fraud.

      Analysis and Decision by the Court

      The Court acknowledged that fair procedure and the Principles of Natural Justice require the provision of requisite documents forming the basis of a SCN to enable the concerned party to submit a proper reply. Failure to provide relevant documents would render the entire procedure of issuing a SCN and filing a reply an empty formality.

      The Court emphasized that the relevant documents forming the basis of the SCN must be provided to the concerned party to enable them to raise an effective defense. Denying this fundamental right by not providing the requisite documents would violate the Principles of Natural Justice.

      Considering the submissions made by the lead bank (SBI) and the Petitioner's counsel regarding the availability of the company's records with the RP, the Court issued the following directions:

      1. The Petitioner and/or his authorized representative shall be allowed to inspect the records of the company available with SBI (the lead bank).
      2. The Petitioner and/or his authorized representative shall also be allowed to inspect the records of the company available with the RP.
      3. Upon inspection, the Petitioner shall state the specific documents required from the company's records that form the basis of the SCNs. These documents shall be provided to the Petitioner.
      4. The cost of providing copies of the relevant documents shall be borne by the Petitioner.
      5. The process of inspection, stating the specific documents, and providing the relevant documents shall be completed within specified timelines.
      6. Upon receipt of the documents, the Petitioner shall file a reply to the respective SCNs within a specified timeline.
      7. The Petitioner is at liberty to request a personal hearing from the respective banks, which shall be considered accordingly.

      The Court disposed of the writ petition in terms of the aforesaid directions.

      Doctrine or Principle Discussed

      The primary doctrine discussed in the judgement is the Principles of Natural Justice, specifically the principle of audi alteram partem (hear the other side). The Court emphasized the importance of providing relevant documents and an opportunity to be heard before taking an adverse decision against a party.

      Comprehensive Summary

      The judgement dealt with a writ petition challenging Show Cause Notices (SCNs) issued by various banks for declaring the account of a company as 'Fraud'. The primary issue was the alleged non-compliance with the agreed terms of the loan documents and various irregularities in the loan account, leading to suspicion of fraudulent activities.

      The Petitioner, an ex-director and guarantor of the company, argued that the SCNs were issued without providing the requisite documents forming the basis of the allegations. The Petitioner contended that the absence of such documents rendered it impossible to submit a proper reply, violating the Principles of Natural Justice.

      The Court discussed the settled principles of law regarding the applicability of the Principles of Natural Justice and the requirement to provide relevant documents forming the basis of a SCN. The Court relied on various Supreme Court judgments, including T. Takano v. Securities and Exchange Board of India and State Bank of India v. Rajesh Agarwal, to emphasize the importance of disclosing relevant materials and providing an opportunity to be heard before taking an adverse decision.

      The Court acknowledged that fair procedure and the Principles of Natural Justice require the provision of requisite documents forming the basis of a SCN to enable the concerned party to submit a proper reply. Failure to provide relevant documents would render the entire procedure an empty formality.

      Considering the submissions made by the lead bank (SBI) and the Petitioner's counsel regarding the availability of the company's records with the Resolution Professional (RP), the Court issued directions for the Petitioner and/or his authorized representative to inspect the records of the company available with SBI and the RP. The Petitioner was directed to state the specific documents required from the company's records that formed the basis of the SCNs, and these documents were to be provided to the Petitioner within specified timelines.

      The Court also directed that upon receipt of the documents, the Petitioner shall file a reply to the respective SCNs within a specified timeline. Additionally, the Petitioner was granted the liberty to request a personal hearing from the respective banks, which shall be considered accordingly.

      The Court disposed of the writ petition in terms of the aforesaid directions, upholding the Principles of Natural Justice and the right to access relevant documents and be heard before an adverse decision is taken.

       

       

      Full Text:

      2024 (5) TMI 1323 - DELHI HIGH COURT

      Topics

      ActsIncome Tax
      Next ➔