Saturday, April 14, 2012


Allahabad High Court

M/S Kan Construction And Colonizers (P) Ltd.  Allahabad High Court

The Commissioner of Income-tax (Appeals) and the Tribunal on analysis of
the facts of the case have reached to the conclusion that section 50C has no
application as it was a case of transfer of plots which was stock in trade. An
income earned from such transaction is liable to be taxed as income from
business activity. Alternatively, the finding recorded by the Tribunal
which is last fact finding court, in this regard is essentially a finding of fact or
at the most is a mixed question of fact, but it is not a substantial question of law to
warrant the interference under section 260A of the Income Tax Act.The view taken
by the Tribunal is on terra-firma  There is no merit in the appeal.
The appeal is dismissed by holding that on the facts of the present
case, the Tribunal has rightly held that the provisions of section 50C
are not applicable with respect of sale of land as sale of land was
not capital asset.

Petitioner :- The Commissioner Of Income Tax & Another  Respondent :-
Smt. Vindhavasini Devi Case :- INCOME TAX APPEAL No. - 265 of 2008
Allahabad High Court

Section 69 of the Act on which reliance has been placed by the learned
counsel for the
Department is as follows: " 69. Where in the financial year immediately preceding the assessment year account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion
of the Assessing officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.

" The bone of contention between the parties is the sale deed in
question which has recorded sale consideration of Rs.5 lacs. The mere
fact that the DVO has reported value of the property as 17 lacs does
not ipso facto leads to the conclusion that unexplained consideration
of above Rs. 5 lacs was actually paid by the assessee. The Appellate
Authority has rightly recorded that in the present case, the seller of
the property even was not called by the Assessing Officer nor there
was any material to come to a conclusion that the amount which has
been added in the income was actually paid by the assessee.

The appellate authority has observed that the burden is on the
Department to show that the two conditions are to be fulfilled:

i) The fair market value of the assets as on the date of the purchase
was more than
the value declared by the assessee. The amount paid has been understated and

ii) Secondly, the assessee has actually paid more than what is declared by him.

The finding of the Appellate Authority as concluded in paragraph 13 as
quoted above is to the effect that there was no material on the record
to show that the actual consideration passed between the two parties
was more than what has been declared by the appellant. The Tribunal
has also affirmed the said finding.
The appeal is concluded by findings of fact. No substantial question
of law is involved. The appeal is dismissed.

Case :- INCOME TAX APPEAL No. - 507 of 2012 Petitioner :- Commissioner
Of Income Tax –II  Respondent :- M/S Arvind Footwear Pvt. Ltd.
Allahabad High Court

The assessee in his return with regard to assessment year 2006-2007 has claimed
deduction under section 80 IB of the Act on the amounts of incentives by way of
duty draw back for treating them as profits derived from industrial undertaking.
The Assessing Officer completed the assessment order vide his order dated
26.8.2008 and did not allow the deduction under section 80 IB of the Act.
A penalty order was issued on 2.12.2010 under section 271(1)(c).

It has been noted in the order of the Tribunal that there was a
difference of opinion at the time when return was filed by the
assessee. The mere fact that claim of deduction under section 80 IB of
the Act could not have been made a basis for imposing penalty, is not
correct. It is not denied that the Apex Court clarified the law in
Liberty India versus Commissioner of Income Tax (Supra) subsequent to
filing of the return. The Apex Court in Commissioner of Income Tax
versus Reliance Petro Products Pvt. Ltd. (Supra) has laid down that
mere making of the claim, which is not sustainable in law, by itself,
will not amount to furnishing inaccurate particulars regarding the
income of the assessee. Such claim made in the return cannot amount to
the inaccurate particulars. The present is a case which is fully
covered by the judgment of the Apex Court in Commissioner of Income
Tax versus Reliance Petro Products Pvt. Ltd.

M/s.Sahil Knit Fab, ITA No.45 of 2007. Himachal Pradesh High Court
Date of decision: 14.03.2012

What we are concerned with in this case is the scope and ambit of the
jurisdiction of the Assessing Officer under Sections 147 and 148 of
the Act. This issue is no longer res-integra and has engaged the
attention of Courts in a number of cases.

23. We need not consider any other precedent as
the law settled by the Supreme Court is clear on the point.

It is not the mere whim or opinion of the Assessing Officer which
would entitle him to invoke the powers for re-opening  assessment.
Comparison of profit with another firm for a different assessment year
subsequent to the assessment year, in which the case of the respondent
was sought to be reassessed, cannot form the ground for ordering
reassessment. The second ground urged that the eligibility of the
assessee for deduction under Section 80-1A could be claimed only after
fulfilling mandatory conditions required, the learned Tribunal holds
that reopening of assessment is permissible to bring to tax escaped
income and not to make investigation or verification. The Tribunal
upholds the decision of the Commissioner Income
Tax(Appeals) that if the return filed by the assessee is required to
be verified by the Assessing Officer which what is required is notice
under Section 143(2) and to proceed with assessment under Section
143(3) on the basis of material gathered by him

The learned Tribunal then proceeded to hold that the reason to believe
would not mean suspicion as laid down by the Supreme Court in ITO vs.
Lakhmani Mewa Das 103 ITR 437 (SC) and Indian Oil Corpn. vs. ITO, 159
ITR 956(SC). In this view of the settled position we cannot accept
that the Assessing Officer was right in reopening assessment. We hold
that as held in Kelvinator’s and Eicher’s case, reason to believe
cannot be interpreted to mean mere just opinion. We, therefore, concur
with the reasoning of the learned Tribunal.

Delhi High Court PINE PACKAGING PRIVATE LIMITED INCOME TAX APPEAL NO. 656/2011 Reserved on: 20th January, 2012 % Date
of Decision: 29th March, 2012 The dispute in the present appeal
pertains to claim for deduction under Section 80 IC of the Act on
Rs.1,05,09,877/- received as “standing charges” from Hindustan Lever
Limited. The aforesaid amount was included by the assessee as a part
of on the total receipts of Rs.9,81,75,513/- on which deduction under
Section 80IC was permissible. “Whether the standing charges payable
under the agreement dated 23rd June, 2004 qualify and are eligible for
deduction under Section 80 IC of the Income Tax Act, 1961?” 15. In the
present case, the standing charges were payable because Hindustan
Lever Limited did not place purchase orders for the normative
production possible. In other words, the assessee was not given
purchase orders equal to the normative production possible. The
assessee, therefore, did not produce or manufacture the products
because of lack of orders or failure of Hindustan Lever Limited to
place purchase orders for the possible normative production. Payment
has been made for non-production and not because of unsold production,
and therefore the failure to buy. In these circumstances, it is not
possible to accept the contention of the assessee that the standing
charges have been paid are towards the cost price of the products
purchased by Hindustan Lever Limited from the assessee. It is not a
part of the purchase/sale price. The standing charges, which have been
paid are not towards the sale price but on account of the fact that
Hindustan Lever Limited did not place the prescribed or the stipulated
purchase orders for supply of products/articles. This had resulted in
non-production and the charges which have been paid were to compensate
the assessee for failure to produce and then market its products 19.
In view of the aforesaid discussion, the question of law accordingly
has to be answered in affirmative, i.e., against the assessee and in
favour of the Revenue