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IV. Direct Taxes Case Laws:
1. CIT Vs. Ansal Land Mark Township (P) Ltd., I.T.A. No. 160/2015, Date of Order: 26.08.2015, High Court of Delhi
Whether
the second proviso to Section 40 (a) (ia) of the Act is declaratory and
curative in nature and should be given retrospective effect from 1st
April 2005.
Held Yes
The
second proviso to Section 40(a) (ia) was inserted by the Finance Act
2012 with effect from 1st April 2013. The effect of the said proviso is
to introduce a legal fiction where an Assessee fails to deduct tax in
accordance with the provisions of Chapter XVII B. Where such Assessee is
deemed not to be an assessee in default in terms of the first proviso
to sub-Section (1) of Section 201 of the Act, then, in such event, “it
shall be deemed that the assessee has deducted and paid the tax on such
sum on the date of furnishing of return of income by the resident payee
referred to in the said proviso”. The first proviso to Section 201 (1)
of the Act was inserted with effect from 1st July 2012. It also states
that where a person fails to deduct tax at source on the sum paid to a
resident or on the sum credited to the account of a resident such person
shall not be deemed to be an assessee in default in respect of such tax
if such resident has furnished his return of income under Section 139
of the Act. No doubt, there is a mandatory requirement under Section 201
to deduct tax at source under certain contingencies, but the intention
of the legislature is not to treat the Assessee as a person in default
subject to the fulfilment of the conditions as stipulated in the first
proviso to Section 201(1). The insertion of the second proviso to
Section 40(a) (ia) also requires to be viewed in the same manner.
This
again is a proviso intended to benefit the Assessee. The effect of the
legal fiction created thereby is to treat the Assessee as a person not
in default of deducting tax at source under certain contingencies.
Turning to the decision of the Agra Bench of ITAT in Rajiv Kumar Agarwal
v. ACIT (supra ) , the Court finds that it has undertaken a thorough
analysis of the second proviso to Section 40 (a)(ia) of the Act and also
sought to explain the rationale behind its insertion and its conclusion
that the said proviso is declaratory and curative and has retrospective
effect from 1st April 2005, merits acceptance.
(Please click here for judgment)
2. CIT Vs. Kabul Chawla, I.T.A. No. 707/2014, Date of Order: 28.08.2015, High Court of Delhi
Whether
the additions made to the income of the Respondent Assessee for the
said AYs under Section 2(22)(e) of the Income Tax Act, 1961 („Act‟) were
not sustainable because no incriminating material concerning such
additions were found during the course of search and further no
assessments for such years were pending on the date of search?
Held Yes
On a
conspectus of Section 153A(1) of the Act, read with the provisos
thereto, and in the light of the law explained, the legal position that
emerges is as under:
i.
Once a search takes place under Section 132 of the Act, notice under
Section 153 A (1) will have to be mandatorily issued to the person
searched requiring him to file returns for six AYs immediately preceding
the previous year relevant to the AY in which the search takes place.
ii.
Assessments and reassessments pending on the date of the search shall
abate. The total income for such AYs will have to be computed by the AOs
as a fresh exercise.
iii.
The AO will exercise normal assessment powers in respect of the six
years previous to the relevant AY in which the search takes place. The
AO has the power to assess and reassess the 'total income' of the
aforementioned six years in separate assessment orders for each of the
six years. In other words there will be only one assessment order in
respect of each of the six AYs “in which both the disclosed and the
undisclosed income would be brought to tax”.
iv.
Although Section 153 A does not say that additions should be strictly
made on the basis of evidence found in the course of the search, or
other post-search material or information available with the AO which
can be related to the evidence found, it does not mean that the
assessment “can be arbitrary or made without any relevance or nexus with
the seized material. Obviously an assessment has to be made under this
Section only on the basis of seized material.”
v. In absence of any incriminating material, the completed
assessment can be reiterated and the abated assessment or reassessment
can be made. The word 'assess' in Section 153 A is relatable to abated
proceedings (i.e. those pending on the date of search) and the word
'reassess' to completed assessment proceedings.
vi. Insofar as pending assessments are concerned, the
jurisdiction to make the original assessment and the assessment under
Section 153A merges into one. Only one assessment shall be made
separately for each AY on the basis of the findings of the search and
any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO
while making the assessment under Section 153 A only on the basis of
some incriminating material unearthed during the course of search or
requisition of documents or undisclosed income or property discovered in
the course of search which were not produced or not already disclosed
or made known in the course of original assessment.
The
present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of
the search the said assessments already stood completed. Since no
incriminating material was unearthed during the search, no additions
could have been made to the income already assessed.
(Please click here for judgment)
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