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III. Direct Taxes Case Laws:
1. Ameeta Mehra Vs. ADIT (Inv.), W.P.(C) 1471/2013 Date of Judgement: 16.05.2017, High Court of Delhi
Issue:
Whether search warrant issued u/s 132 of the Income Tax Act, 1961
is valid, in the absence of any credible information with the department
that could lead to the reasonable belief that the person is in
possession of undisclosed income/ assets?
Held: No
Brief facts:
The petitioner is an individual engaged in the business of horse
breeding. Search u/s 132 of the Act was undertaken on the residential
and business premises of Mr. Suresh Nanda, maternal uncle of the
Petitioner. During the search on Mr. Suresh Nanda, keys of locker
No.4979 with Delhi Safe Deposit Co. Limited, New Delhi were found. This
locker was initially in the joint names of late Mrs. Sumitra Nanda and
late Mr. S.M. Nanda, parents of Mr. Suresh Nanda. Mrs. Sumitra Nanda,
the Petitioner's maternal grandmother, added the petitioner's name in
2003 to help her in operating the said locker No. 4979. However, the
keys of the locker used to be with Mrs. Sumitra Nanda and After the
demise of Mrs. Sumitra Nanda, the key remained with Mr. Suresh Nanda. A
search warrant was issued to the petitioner to search the said locker
and on search of the locker nothing was found. After that, a notice
under Section 153A of the Act was issued requiring the Petitioner to
furnish returns of total income and undisclosed income for AYs 2006-07
to 2011-12 in the prescribed format. The petitioner objected to the
issuance of the above notice. However, no reply was given by the
department. In these circumstances, she filed the petition before the
Hon’ble High Court.
Held:
The Hon’ble High Court held that before a search under Section 132
(1) of the Act can be authorised following facts should be established
that (i) the authority issuing the authorisation is in possession of
some credible information, other than surmises and conjectures (ii) the
authority has reason to believe that the conditions stipulated in
clauses (a), (b) and (c) of Section 132 (1) qua the person searched
exist; and (iii) the said information has nexus to such belief. However,
in the instant case, there is nothing in the Satisfaction Note to
indicate that there was any credible information available with the
Department that the petitioner is in possession of any money, jewellery
or valuable representing her income which has not been or would not be
disclosed by her.
The
mere fact that the key to the locker which she was operating was found
during the search of her uncle Mr Suresh Nanda would not constitute
'information' leading to the reasonable belief that the locker would
contain jewellery, or other valuable articles which she would not have
disclosed in her returns. Therefore, the jurisdictional pre-condition
justifying the invocation of the power of search under Section 132 (1)
of the Act against the Petitioner, was not fulfilled in the present
case.
Therefore, the writ petition is allowed.
(Please click here for judgment)
2. Col. Jaspal Singh Vs. ITO, I.T.A. No. 6321/Del/2016, Date of Judgement: 15.03.2017, ITAT - Delhi
Issue:
Whether Mesne Profits (i.e. compensation payable to the owner of the
property for unlawful possession of others property) received on account
of damages for deprivation of use and occupation of property should be
treated as Capital Receipt?
Held: Yes
Brief facts:
The assessee had leased his flat to NTPC ltd. However. NTPC Ltd. did
not vacate the premises even after expiry of the lease. Suit for
eviction was filed by the Appellant and the trial court awarded Mesne
profits @Rs.40/- per sq. ft. to the assesse which was received by him in
AY 2012-13. The assessee filed return declaring income of
Rs.3,28,260/-. However, the Mesne profits of Rs. 10,75.365/- received
towards wrongful possession of property by NTPC Ltd. was treated as
non-taxable and hence, not offered to tax. The Ld. AO has assessed Mesne
Profits to tax by treating the same as Revenue Receipt. The CIT(A)
upheld the assessment order and confirm the addition. Being aggrieved,
the assessee preferred appeal before the Hon’ble ITAT.
Held:
The Hon’ble ITAT held that after the termination of lease, NTPC was
occupying and using the property unauthorizedly and thus the assessee
was deprived of the use and occupation of the property and therefore,
the mesne profits received by the assessee under the consent decree
awarded by the Court was on account of damages for deprivation of use
and occupation of the profits and therefore, the sum so received was
capital in nature not chargeable to tax.
Therefore, the appeal of the assessee was allowed.
(Please click here for judgment)
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