Faceless reassessment before notification of e-Assessment of Income Escaping Assessment Scheme, 2022 Validity of faceless reassessment proceedings initiated and substantially conducted before the notified e-Assessment of Income Escaping Assessment Scheme, 2022 came into force - HELD THAT: - Although section 151A was on the statute book, the scheme for faceless assessment of income escaping assessment became effective only upon publication of the notification on 29.03.2022. The notices initiat... ... ...

Transfer pricing adjustment for outstanding associated-enterprise receivables - Arm's length price and abnormal credit period Separate transfer pricing adjustment for interest on outstanding receivables from the associated enterprise arising from provision of IT enabled services, despite acceptance of the principal transaction at arm's length - HELD THAT: - A separate adjustment for delayed receivables is not warranted where, after factoring the credit-period adjustment, the price cha... ... ...

Unexplained cash credits - repayment of existing loan receivables - Specified Bank Notes - source of cash deposits - Double taxation of interest income Addition as unexplained cash credit in respect of Specified Bank Notes received towards instalments of existing micro-finance loans during demonetisation - HELD THAT: - The enquiry under section 68 concerns whether the nature and source of a credit have been satisfactorily explained; the denomination in which a receipt was made does not by its... ... ...

Deduction u/s 80-IA(4) in respect of its captive cogeneration power plant - Deduction for captive cogeneration undertaking - Valuation of inter-unit transfer of process steam - Common-cost allocation between electricity and process steam Whether, while computing the profit of the eligible undertaking, the assessee was justified in allocating a part of the total operating cost of the cogeneration plant to low-pressure steam supplied to its paper-manufacturing division, or whether such low-pres... ... ...

Reassessment jurisdiction - assessment of income forming basis of reopening - Assessment of independent income in reassessment proceedings Validity of reassessment where the alleged capital gain forming the basis of the notice was not assessed and additions were made only in respect of notional rental value and the head of assessment of disclosed rental receipts - HELD THAT: - The notice under section 148A(b) was founded exclusively on alleged escapement of capital gains from a purported sale... ... ...

Validity of sanction for reassessment - Non-application of mind in grant of approval Validity of the sanction for reopening where the approval invoked the extended limitation provision despite the recorded escaped income being below the prescribed threshold and was granted by the Principal Commissioner after expiry of three years - HELD THAT: - The approval recorded escaped income below the threshold applicable to reopening beyond three years, yet invoked the extended limitation provision. Th... ... ...

Revision for inadequate inquiry u/s 263 - as per CIT AO had not made adequate inquiry into short-term capital gains from trading in alleged penny-stock shares - HELD THAT: - The reassessment had been initiated on specific information concerning the share transactions, and the AO had raised specific queries. The assessee furnished documentary material, including contract notes, brokerage and ledger details and bank statements, which was considered before the returned income was accepted. AO ha... ... ...

TP Adjustment - Arm's length interest on foreign currency loans - Selection of comparables under TNMM - Interest on delayed receivables from associated enterprises - Disallowance of expenditure in absence of exempt income Arm's length interest on foreign currency loans - LIBOR-based benchmarking - Benchmarking of interest on loans advanced to associated enterprises and repayable in US dollars - HELD THAT: - Where the loans were repayable in US dollars, the foreign-currency lending ben... ... ...

Transfer pricing adjustment for advertising, marketing and promotion expenditure - Working capital adjustment and interest on outstanding receivables - Form 26AS income mismatch involving associated enterprises' receipts Advertising, marketing and promotion expenditure under TNMM - Separate benchmarking of inter-linked international transactions - Separate transfer pricing adjustment for advertising, marketing and promotion expenditure after the agency commission, advertising sales and ma... ... ...

TP adjustment for advertising, marketing and promotion expenditure - Existence of international transaction in brand-promotion expenditure - adjustment through the Bright Line Test or the Cost Plus Method HELD THAT: - The Hon'ble Jurisdictional High Court in the case of Sony Ericson [2015 (3) TMI 580 - DELHI HIGH COURT] holding the BLT approach of computing transfer pricing adjustment of AMP expenses as invalid. Also see Maruti Suzuki India Ltd. [2015 (12) TMI 634 - DELHI HIGH COURT] and CIT ... ... ...

Ad hoc disallowance of business expenses in petrol/diesel outlet business - Reasonableness of estimated expense disallowance Ad hoc disallowance of business expenses claimed by a petrol/diesel outlet dealer for incomplete substantiation of a portion of the expenditure - HELD THAT: - Having regard to the high volume of transactions in the assessee's business, the disclosed profit and gross-profit margins, and the fact that the disallowance was made on an ad hoc basis for incomplete substan... ... ...

Tax deduction at source on foreign leave travel concession - Interest for failure to deduct tax at source Tax deduction at source on foreign leave travel concession - Assessee in default for non-deduction of tax - Liability of the employer-bank to deduct tax at source on foreign leave travel concession paid to its employees - HELD THAT: - Foreign leave travel concession was not exempt and was taxable as salary. The obligation to deduct tax is distinct from recovery of tax from employees; susp... ... ...

Validity of reassessment notice issued without pecuniary jurisdiction - Incurable jurisdictional defect in reassessment - Validity of reassessment initiated by an Income-tax Officer where the returned income exceeded the pecuniary limit assigned to that rank under the CBDT Instruction HELD THAT: - The notice under section 148 was a jurisdictional notice and, under the binding CBDT Instruction, was required to be issued by an officer of the rank of Assistant Commissioner or Deputy Commissioner... ... ...

Bogus purchases from the principal supplier - Supplier deregistration and non-compliance in bogus-purchase additions - Unsubstantiated alleged-purchase addition Genuineness of construction-material and labour-subcontract purchases from Dethat Trading Pvt. Ltd. - Use of incomplete and irrelevant third-party statements - Addition for alleged bogus purchases of construction materials and labour-subcontract services from Dethat Trading Pvt. Ltd. for Assessment Years 2020-21 and 2021-22 - HELD THA... ... ...

Attribution of profits to permanent establishment from offshore equipment supplies - Profit attributable to the assessee's Indian Project Office in respect of offshore supplies of equipment HELD THAT: - The Assessing Officer had broadly relied on findings in the case of Alcatel Lucent France [2016 (6) TMI 301 - DELHI HIGH COURT] for attributing profits. The assessee agreed, to avoid further litigation, to an attribution rate of 2.5%, which the Tribunal found reasonable. [Paras 7, 8] Pr... ... ...

Pecuniary jurisdiction for issuance of notice u/s 143(2) - Incurable jurisdictional defect in assessment proceedings - Binding nature of CBDT instructions - Curability of jurisdictional defects u/s 292BB Validity of the assessment where notices u/s 143(2) were issued by an Income-tax Officer despite the returned income exceeding the pecuniary limit prescribed for that rank under the CBDT Instruction - HELD THAT: - The CBDT Instruction required notice to be issued by an Assistant Commissioner ... ... ...

Capital gains exemption for charitable trusts - Acquisition of another capital asset - fixed deposits and a savings-bank balance created from sale proceeds qualify as acquisition of another capital asset for exemption u/s 11(1A). HELD THAT: - A deposit in a scheduled bank, whether by fixed deposit or in a savings-bank account, is a permissible mode of investment and constitutes another capital asset for the purposes of exemption under section 11(1A). The character of a bank deposit as a capit... ... ...

Concessional tax regime u/s 115BAA denied - delayed electronic filing of Form 10-IC Entitlement of a domestic company to the concessional tax regime u/s 115BAA where Form 10-IC was uploaded after filing the return but within the extended time allowed by the CBDT - HELD THAT: - The Tribunal held that non-filing of Form 10-IC online on or before filing the return of income is a curable defect. Since the CBDT had extended the time for filing Form 10-IC for the relevant assessment year and the as... ... ...

Valid Sanction for reassessment - Mechanical approval u/s 151 - Validity of reassessment where the approval u/s 151 was granted through a common approval covering 111 cases HELD THAT: - Sanction under section 151 is a meaningful statutory safeguard requiring the competent authority's independent application of mind to the reasons and material of the particular case; a general approval which does not disclose the material considered in an individual case is mechanical and invalid. The a... ... ...

Ex parte first-appellate order - Effective opportunity of hearing in faceless appellate proceedings - Speaking appellate order Validity of the ex parte disposal of the first appeal where the assessee was allowed less than fifteen days to respond to each of the hearing notices - HELD THAT: - The opportunities afforded through the notices were held to be neither real, reasonable nor effective, since each allowed less than fifteen days for compliance. Such paper opportunities did not enable the ... ... ...