RNM Tax Alert – Direct Tax Part for November 2023

• INSTRUCTION NO. 2/2023 [F. NO. 312/82/2022-OT], DATED 10-11-2023

That the CBDT prescribes Monetary limit of Rs. 10 lakh or more to withhold refund under Sec. 245(2). The time limit is hereby revised to 20 days for the Faceless Assessment Unit and to 30 days for Jurisdictional Assessing Officer.

• CBDT extends time limit to process refund claimed ITRs for AYs 2018-19 to 2020-21 to January 31, 2024 [F. NO. 225/132/2023/ITA-II; dated 01.12.2023]

The CBDT in view of pending taxpayer grievances related to the issue of refund, the CBDT directed that all validly filed returns for Assessment Years 2018-19, 2019-20 and 2020-21 bearing refund claims can be processed until 31-01-2024.

Important Judicial Precedents

• Whether penalty notice issued under section 271(1)(c) gets invalidated if contradictory wordings given by the AO reflect lack of clarity on as to whether the Assessee concealed particulars of income or furnished inaccurate particulars of income – YES: HC

[2023-TIOL-1516-HC-DEL-IT_ITA No. 258/2019 PCIT-6 Vs. M/s MODI RUBBER LTD]

The AO begins by saying that the respondent/assessee had furnished inaccurate particulars of his income in respect of disallowance of various additions made by the AO and, then, while computing the penalty that he imposed on the respondent/assessee, he goes on to say that the respondent/assessee had furnished “inaccurate particulars of income or concealed income”. There was obviously no clarity in the mind of the AO as to which limb of Section 271(1)(c) of the Act got attracted in the instant case for initiation, followed by imposition of penalty. Thus, for the foregoing reasons, we find that there is no substantial question of law which arises for our consideration. The appeal is, accordingly, closed.

• Whether assessment order cannot be passed once company is struck off, since same will be construed as passing of order against dead person – YES: HC

2023-TIOL-1523-HC-MAD-IT WP No. 11841 of 2022 and WMP No. 11278 of 2022 PANDIAN ANBALAGAN Vs. INCOME TAX OFFICER,

It is admitted by both sides that against the Company, which was struck off as early as on 21.10.2019, the re-assessment notice dated 31.03.2021 was issued and the re-assessment order dated 30.03.2022 was passed by the Dept. As far as the submission made by the counsel for the Dept. is concerned, Section 176 of the Income Tax Act mainly talks about the discontinued business and it does not mention anything about struck off of the company. Further, Section 176 of the Income Tax Act states that if any company discontinued from business and had not carried on any other business, the re-assessment order can be passed against the Principal Officer of the Company. However, the assessment order cannot be passed once the company is struck off, since the same will be construed as passing of order against a dead person. Therefore, this Court is of the view that the right course available for the Department is only to approach the NCLT in terms of provisions of Section 252 of the Companies Act read with Rules 11 and 87 of the NCLT Rules for the revival of the Company. After revival of the Company, it is open for the Department to initiate proceedings under Section 147 of the Income Tax Act.

• Whether since revenue had framed assessment u/s 143(3) r.w.s. 144B without issuing show cause, principles of natural justice are violated and hence such assessment deserves to be quashed – YES: HC

[2023-TIOL-1524-HC-AHM-IT _R/Special Civil Application No. 15971 Of 2021

RIDDHI SECURITIES LTD Vs. THE NFAC.]

What needs to be considered in fact is whether by not issuing show cause notice while framing the assessment, principles of natural justice have at all been violated. As submitted by counsel for the assessee that a Division Bench of this court, albeit in somewhat different facts in Special Civil Application No. 4806 of 2022 in an oral judgement considering the provisions of Section 144B held that without issuing show cause notice and framing the assessment by not following the procedure prescribed u/s 144B, the revenue was in violation of the principles of natural justice. The order of assessment passed by the revenue u/s 147 rws 144B and demand notice for the AY 2018-19 u/s 156 are quashed and set aside.

• Whether interest on late payment of TDS is not in nature of penalty, same is allowable u/s 37 of Act – YES : ITAT

2023-TIOL-1466-ITAT-AHM_ITA No. 1843/Ahd/2018 AY: 2011-12 AATASH DREDGING AND CONSTRUCTIONS PVT LTD Vs. DCIT

The assessee paid interest on late payment of TDS. Interest is not in the nature of penalty. Though penalty paid is not allowable under Section 37(1) of the Act, but interest paid for late payment prescribed under statute; on the other hand, the penalty is violation of any provision but paid the amount late but with interest, the same is allowable. ………Thus, it was found that as the case of late payment of TDS is not in the nature of penalty, the same is allowable under Section 37 of the Act. In that view of the matter, the above disallowance made by the authorities below to the impugned amount of Rs.2,19,170/- is hereby quashed. The addition is, therefore, deleted. 

• [2023] 156 taxmann.com 82 (Gujarat-HC) PCIT Vs. Rakesh Kailashchand Jain

Where Assessing Officer received report from Investigation Wing that assessee was beneficiary of accommodation entries in form of bogus purchases from a group and made 100 per cent addition with respect to said purchases, Tribunal was justified in limiting addition in respect of bogus purchases at rate of 6 per cent of total purchases considering only income component of disputed transaction.

• [2023] 156 taxmann.com 308 (SC) Deputy Commissioner of Income-tax, Central Circle vs. Bharat Jayantilal Patel

SLP dismissed against order passed by High Court holding that where AO issued a reopening notice on ground that capital gains income had arisen to assessee on transfer of development rights in its land to a developer, since assessee had merely granted licence to permit construction on land to such developer but not given any possession in land as contemplated under section 53A of T.P. Act, 1882, there was no transfer as per section 2(47)(v) giving rise to any capital gain in hands of assessee and, thus, impugned reopening notice was not justified.

• [2023] 156 taxmann.com 691 (SC) Principal Commissioner of Income-tax (Central) 2 vs. Jay Ambey Aromatics

Section 153A of the Income-tax Act, 1961 – Search and seizure – Assessment in case of (Condition precedent) – Assessment years 2010-11 and 2011-12 – High Court held that where assessment of assessee had attained finality prior to date of search and no incriminating documents or materials had been found and seized at time of search, no addition could be made under section 153A as case of assessee was of non-abated assessment – Whether in view of decision of Supreme Court in case of Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell P. Ltd. [2023] 149 taxmann.com 399/293 Taxman 141 , no case was made out for interference and ,thus, Special Leave Petition against High Court’s order was to be dismissed – Held, yes [Para 3] [In favour of assessee].

• [2023] 157 taxmann.com 6 (Delhi – Trib.) Net Agri Co. (P.) Ltd. vs. Income Tax Officer, Ward No. 18(1)

Where AO made an addition to assessee’s income on account of unexplained source of investment in property, however, CIT(A) further noting that there were certain cash deposits in bank account of assessee which were not explained made an addition on account of said amount in bank account, since CIT(A) failed to put assessee on notice and questioned source of cash deposits in bank account and considered same as unexplained cash credits, said addition made by CIT(A) on a new source in form of source of sum credited in bank account was not sustainable.

• [2023] 156 taxmann.com 472 (Delhi – Trib.) Chandra Pal vs. Assistant Commissioner of Income-tax, Central Circle-II

Where Assessing Officer made addition under section 69A on account of jewellery found in search of assessee, since assessee had shown sufficient income in its return for preceding years which showed wealthy status of assessee and jewellery was received on occasions from relatives, excess jewellery was very much reasonable and, thus, no addition under section 69A was to be made.

• [2023] 157 taxmann.com 64 (Delhi – Trib.) DSD Noell GMBH vs. Deputy/Assistant Commissioner of Income-tax, Circle – 1(2)(2) (IT)

Where assessee, a tax resident of Germany, entered into an agreement with a company for offshore supply of plant and equipment as well as for offshore services (involving supply of related drawings design), in view of fact that such equipment were transferred by assessee outside India and entire sale was executed outside India, revenue received by assessee therefrom could not to be taxed in India.

• [2023] 156 taxmann.com 640 (Chennai – Trib.) Deputy Commissioner of Income-tax, Corporate Circle vs. Ramco Systems Ltd.

Where assessee claimed relief of foreign tax credit at rate of 10 per cent of royalty received by it from Australian company and said claim was accepted by AO, but thereafter, due to revision in rate of withholding tax to 15 per cent , additional withholding tax was deducted , but AO did not allow claim of additional tax deduction , once credit for foreign withholding tax had been allowed at 10 per cent , subsequent revisional rate of tax was also required to be allowed.

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