Gangadharan vs. CIT (Supreme Court)

Held, by 3 judge Bench, resolving conflict of opinion amongst other benches of the SC, that:

(1) merely because in some cases the revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher Court when divergent views are expressed by the Tribunals or the High Courts.

(2) If the assessee takes the stand that the revenue acted mala fide in not preferring appeal in one case and filing the appeal in other case, it has to establish mala fides.

Deepak Agro Foods vs. State (Supreme Court)

Where the High Court was satisfied that the assessment order had been back-dated and directed that a fresh order be passed by a different AO and the assessee filed an appeal arguing that the assessment proceedings should have been declared null and void, held:

(a) All irregular or erroneous or even illegal orders cannot be held to be null and void as there is a fine distinction between the orders which are null and void and orders which are irregular, wrong or illegal. Where an authority making order lacks inherent jurisdiction, such order would be without jurisdiction, null, non est and void ab initio as defect of jurisdiction of an authority goes to the root of the matter and strikes at its very authority to pass any order and such a defect cannot be cured even by consent of the parties. However, exercise of jurisdiction in a wrongful manner cannot result in a nullity - it is an illegality, capable of being cured in a duly constituted legal proceedings.

(b) Proceedings for assessment under a fiscal statute are not in the nature of judicial proceedings, like proceedings in a suit inasmuch as the assessing officer does not adjudicate on a lis between an assessee and the State and, therefore, the law on the issue laid down under the civil law may not stricto sensu apply to assessment proceedings.

(c) Despite scathing observations by the High Court on the conduct of the assessing officer, it was a case of an irregularity in assessment proceedings by the officer, who was not bereft of authority to assess the appellant. At best, it was an illegality, which defect was capable of and has been cured by the High Court by setting aside the orders and by granting consequential relief.

Steel Authority vs. STO (Supreme Court)

Where the Appellate Commissioner disposed of the appeal by a non-reasoned order, held that a statutory appeal could not be disposed of in that manner. Reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same it becomes lifeless. Failure to give reasons amounts to denial of justice." "Reasons are live links between the mind of the decision-taker to the controversy in question and the decision or conclusion arrived at Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made; in other words, a speaking-out.

Valvoline Cummins vs. DCIT (Delhi High Court)

Where the returned income was Rs. 7.25 crores but the assessed income was Rs. 58.68 crores and the assessee had filed a stay application before the Addl. CIT but the same was disposed of by the DCIT, a junior functionary, held:

(i) In accordance with Instruction No.96 dated 21st August, 1969 issued by the CBDT where the income determined is substantially higher than the returned income, that is, twice the latter amount or more, then the collection of tax in dispute had to be held in abeyance till the decision on the appeal is taken;

(ii) The Assessee would, in normal course, be entitled to an absolute stay of the demand on the basis of the above Instruction though it voluntarily agreed to pay 15% of the demand;

(iii) As the Addl. CIT was the AO, he had the power and duty to deal with a stay petition u/s 220 (6). He could not abdicate or relinquish the statutory power nor could he suo motu divest himself of this power and confer it upon a junior functionary such as the DCIT;

(iv) The fact that the assessee had acquiesced in the power of the DCIT could not confer jurisdiction upon the DCIT;

(v) In view of the unreasonable stance of the department, it was directed to pay costs of Rs. 15,000.

See Also: Legrand vs. UOI (Bom) and Mahindra & Mahindra vs. AO (Bom).

CWT vs. Value Capital Services (Delhi High Court)

(1) In a case where it is alleged that persons contributing share application moneys are bogus, it is quite obvious that is very difficult for the assessee-company to show the creditworthiness of strangers. If the Revenue has any doubt with regard to their ability to make the investment, their returns may be re-opened by the department.

(2) In any case, there is an additional burden on the Revenue. It must show that even if the applicant does not have the means to make the investment, the investment made by the applicant actually emanated from the coffers of the assessee-company so as to enable it to be treated as the undisclosed income of the assessee-company.

See also: CIT vs. Divine Leasing & Finance (Supreme Court)

CWT vs. Sona Properties (Bombay High Court)

(i) It is not open to the WTO u/s 16A of the W. T. Act to call for the report of the Valuation Officer after the assessment proceedings are completed and use that report to commence proceedings for reassessment. The jurisdiction conferred on the WTO is limited to calling for the report when the proceeding are pending and not when the Wealth Tax Officer becomes functious officio.

(ii) A report of the DVO called for after the assessment proceedings is without jurisdiction and consequently a nullity. Such report cannot give "reason to believe" to reopen the assessment u/s 17.

(iii) The position in law in so far as a report which was called for but not received during the pendency of the proceedings but received subsequent to the proceeding will have to be treated differently. The fact that the assessment has been completed is not a bar to considering the DVO's report and to be used as the basis for reopening the assessment.

Shri. Ranjeet Singh vs. ACIT (ITAT Delhi)

Where the assessee was assessed at Delhi but a notice u/s 148 was issued by the AO in Ghaziabad and the assessee had protested the usurpation of jurisdiction from the beginning, held:

(i) The assessee was entitled to challenge the exercise the exercise of jurisdiction by the AO at Ghaziabad and on facts that AO did not have jurisdiction;

(ii) The notice u/s 148 being without jurisdiction, cannot be saved by s. 292B;

(iii) As the notice is void, the consequent assessment order is void as well.

E-Gain Communication vs. ITO (ITAT Pune) (5.3 MB)

Where the assesee was a captive company rendering software development services to its parent company and was entitled to receive actual cost + 5% and it was agreed that the Transactional Net Margin Method (“TNMM”) was the appropriate method for determining arms’ length price, held:

(a) the strength of TNMM is that net margins (e.g. return on assets, operating income to sales and possibly other measures of net profit) are less affected by transactional differences than is the case with price as used in the CUP Method;

(b) However, the TNMM method also has a weakness because the net margin can be affected by factors that do not have an effect on price or margins; (c) Accordingly, the TNMM has to be used sensibly and with appropriate adjustments to account for differences. Similarities and differences have to be carefully scrutinized to see the differences of situations, circumstances and environments;

(d) On facts, where two entities taken for comparison showed extraordinary results and had income from other sources, they had to be ignored;

(e) The margin of profit of the assessee has to be computed by adopting depreciation as per Indian laws if a higher rate has been provided in the accounts.

Mrs. Mudra Nanavati vs. DCIT (ITAT Mumbai)

The issue of notice under s. 143 (2) I. T. Act within the time limit is mandatory for block assessment proceedings. If notice u/s 143 (2) is issued beyond the time limit, the block assessment order passed u/s 158BC is not valid.

See also: CIT vs. Scindia HUF (Bombay High Court), ACIT vs. Parekh Marine Agencies (ITAT Mumbai), ACIT vs. Aurangabad Holiday Resorts (ITAT Pune), Atul Glass Industries vs. DCIT (ITAT Delhi), Vin Vish Corporation vs. ACIT (ITAT Mumbai) & Tulika Mishra vs. JCIT (ITAT Delhi).