Analysis, Income Tax

Most Cited Unreported Judgments

Last week in our article series we discussed the oft overlooked unreported judgments. After establishing how these judgments are a prominent part of the corpus of judicial literature in India, and a valuable resource for any diligent practitioner, we thought we’d trawl our database to uncover the most popular unreported judgements. These judgements on important and interesting issues would simply fly under the radar for most people.

Case: ACIT vs. M-s Bangalore Commercial Transport Credit Co-operative Society Ltd.

 ITAT Bangalore | Cited 249+ times

This case discusses  whether a cooperative society which was engaged in the business of providing credit to its members would be entitled to a deduction under Section 80P(2)(a)(i). In this case, the Assessing Officer had sought to deny the deduction to the cooperative society by applying Section 80P(4). The Tribunal held that Section 80P(4) was only attracted in cases of cooperative banks and hence would not apply to the assessee’s case.

“If the intention of the legislature was not to grant deduction u/s 80P(2)(a)(i) to cooperative societies carrying on the business of providing credit facilities to its members, then this section would have been deleted. The new proviso to section 80P(4) which is brought into statute is applicable only to cooperative banks and not to credit cooperative societies. The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application in the assessee’s case and therefore, it is entitled to deduction u/s 80P(2)(a)(i) of the Act.”

Case: Trishul Enterprises vs. DCIT

ITAT Mumbai | Cited 84+ times

This case dealt with imposition of penalty on the assessee. The assessee contended that the assessing officer had not specified under which limb of the penal section had the penalty been imposed, i.e, for concealment of income or for furnishing of inaccurate particulars. Hence, according to the assessee, the penalty proceedings could not be sustained since the notice was not proper. The Tribunal ruled in favor of the revenue, relying on a decision of the jurisdictional High Court in the case of CIT vs. Smt. Kaushalya  and stated that mere failure to strike out one of the two limbs would not invalidate a notice.

“The Hon’ble jurisdictional High Court in CIT Vs Smt. Kaushalya (216 ITR 660) while considering similar contention with regards to not striking off of inaccurate particular or concealed income in the notice, held, that mere not striking off specific limb cannot by itself invalidate notice issued under section 274 of the Act. The language of the section does not speak about the issuance of notice. All that is required is that the assessee be given an opportunity of show cause. The issuance of notice is an administrative device for informing the assessee about the proposal of levy of penalty in order to enable him to explain why it should not be levied against him.”

Author’s Note: Interestingly enough, a completely different view has been taken by the Gujarat and Karanataka HC on the same issue. Both have held that a notice for initiation of penalty proceedings must specify why the penalty is being imposed. While the Gujarat HC case was differentiated by the Tribunal, the Karnataka HC case, CIT vs. M-s Manjunatha Cotton and Ginning Factory makes the following pertinent observation –

“It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is sine qua non for initiation of proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds.”

Case: Tangudu Jogisetty vs. ITO

ITAT Vishakhapatnam | Cited 72+ times

The present case dealt with the determination of net profit of an IMFL retailer in the state of Andhra Pradesh. The Assessing Officer had found the net profit rate declared by the assessee to be very low and called for production of books of accounts. Finding the evidence produced by the assessee to be unsatisfactory, the AO relied on a decision of the AP High Court to assess the net profit at 20% of total purchases. The Tribunal however did not accept the AO’s line of reasoning. The Court observed that the case relied upon by the AO was markedly different on facts as it dealt with a dealer of country liquor whereas in the present case, the assessee was a dealer of IMFL. Hence, the same rate of profit could not be attributed to it since the two dealers were dealing in different types of goods.

“Considering the facts and circumstances of this case and also respectfully following the ratios of coordinate bench, we are of the view that the net profit estimated by the A.O. by relying upon the decision of Hon’ble A.P. High Court (supra), which was rendered under different facts is quite high. On the other hand, the assessee relied upon the decision of coordinate bench and the coordinate bench under similar circumstances estimated the net profit of 5% on total purchases net of all deductions. No contrary decision is placed on record by the revenue to take any other view of the matter than the view so taken by the coordinate bench.”

Written by Siddharth P. Sharma, Associate Product Manager @ Riverus

Also Read: Deductions for the differently abled under Section 80U

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