Income tax : Weekly case law updates (10th Dec 2018 to 14th Dec 2018)



Income tax : Weekly case law updates ( 10th Dec 2018 to 14th Dec 2018)



     1. No need to process Vodafone’s refund based ITRs on likelihood of arising huge         demands: HC


IT : Writ Petition is filed by petitioner-Vodafone on account of inaction on part of Assessing Officer in not processing income tax returns for four Assessment Years 2014-15 to 2017-18 which will result in issuance of refunds aggregating to Rs. 4759.74 crores

• The High Court noted that for the Assessment Years in consideration, for Assessment Year 2014-15, the petitioner has approached the AAR and for Assessment Years 2015-16 and 2017-18, scrutiny assessments are pending before the Assessing Officer and that the petitioner has undertaken two schemes of amalgamation involving merger of certain group companies in order to restructure its business operations and increase operational efficiencies. In light of the above fact, assessments for the Assessment Years 2012-13 and 2013-14 are under special audit and any demand that would arise from the processing of the said assessment years are to be allowed to be adjusted against the refund claims.

• It held that since substantial outstanding demand are pending against the petitioner, revenue should have the right to adjust the demands against the refunds that may arise but have not yet been determined due to ongoing scrutiny proceedings. Thus, Assessing Officer has rightly exercised discretion under section 143(1D) not to process the returns considering the fact that substantial demand has been raised on completion of scrutiny assessment of earlier years.
[[2018] 100 taxmann.com 310 (Delhi)]

2. No escape from penalty though tax was deducted by bank on interest income before close of financial year

IT : In terms of section 194A(1), time of deduction of tax is undisputedly time at which interest is to be credited to account of payee or when it is paid in cash/cheque or draft therefore, deduction of tax at source on interest income before close of financial year concerned as provided under section 194A(4) would not absolve assessee bank from penalty for not deducting tax at source at time of credit of said income in payee’s account
[2018] 100 taxmann.com 231 (Allahabad)


3. HC slams AO for adopting cash accounting system if mercantile accounting system was consistently followed

IT: Where assessee, engaged in business of land development, had been consistently following mercantile system of accounting in respect of all its projects, assessee was not justified in adopting cash system of accounting in respect of only one project [2018] 100 taxmann.com 228 (Bombay)

4.  VAT collected on behalf of State Govt. not an income just because it was routed through P&L a/c

IT : Retention of a part of VAT at multi-purpose barrier collected by assessee-society as per section 34 of VAT Act, 2005 till process of determination of its actual expenditure incurred on collection, followed by deposit of balance surplus amount in Government Treasury for onward transmission to State Government, cannot be treated as ‘real income’ in hands of assessee for purpose of IT Act, 1961  [2018] 100 taxmann.com 290 (Himachal Pradesh)

5. HC justified sec. 68 additions as assessee failed to explain huge cash sales only in 1 month during year

IT: Where assessee had sold a new product launched by it on test market basis over and above its counter sale but failed to explain as to how and why such cash sales of huge amount effected only in one month of a year, Assessing Officer was justified in making additions in respect of such unexplained sales under section 68 [2018] 100 taxmann.com 181 (Himachal Pradesh)

6.View of courts regarding Writ Petitions filed against the Notices issued under Sections 147/148

Recent times have seen a rise in the Writ Petitions filed against the notices issued under Section 148 of Income Tax Act, which relates to re-opening of the assessment before various Hon’ble High Courts. The Hon’ble Supreme Court and different High Courts have consistently taken the view that Writ Petitions filed directly against the notice issued under Section 148 should not be entertained ordinarily. [2018] 100 taxmann.com 273 (Article)

7. Payment of advance salary to defeat purpose of demonetisation won’t come under purview of benami transaction

IT/Prohibition of Benami Property Transactions Act: Payment of advance salary by employer to its employee to defeat purpose of demonetisation didn’t come under purview of Benami Transaction [2018] 100 taxmann.com 179 (PBPTA – AT)

8. No concealment penalty just because an inadmissible claim of deduction was raised

IT: Where assessee engaged in re-financing of loan given for purchase of residential houses, disclosed all particulars relating to claim of deduction under sec. 36(1)(viii), mere fact that AO opined that since assessee was not directly engaged in providing long-term finance for construction of purchase of houses and thus assessee’s claim was inadmissible, could not be a ground to pass a penalty order under sec 271(1)(c) [2018] 100 taxmann.com 162 (Delhi)

9. Amendment to sec. 2(14) providing aerial distance for determining agricultural land has no retro-effect

IT: Provisions of item (b) of sub-clause (iii) of section 2(14) which provides for considering distance of land from municipal limits aerially, not by road, and which have been substituted by Finance Act, 2013 with effect from 1-4-2014 are prospective in operation [2018] 100 taxmann.com 145 (Bangalore – Trib.






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