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Dear Students and Members,


Please find below some latest case laws of 2009 compiled specially for CA and CS Students. This article covers 2009 series decided cases on Income Tax. For ready reference you may bookmark this page. Hope this compilation would be off some help in your Exam preparation:


You may also download the below case laws in the form of a handout from the link mentioned below:


Tax Case Laws Digest 2009   



1.         Commissioner of Income Tax vs. Dass Trading & Holding (P) Ltd. (2009):


Penalty under s. 271(1)(c)- Concealment- Declaration of additional income in revised return. Assessee had shown substantial agricultural income in its original return. It is only after the Addl. Director of IT(Inv.) inquired into the matter and found that the assessee had declared bogus agricultural income it filed the revised return accepting the fact that the aforesaid income was not agricultural income and declared the same as taxable income. Inquiries revealed that the assessee had not sold any agricultural produced and that even the agricultural land in question did not exist. Thus, the contention of the assessee that the revised return was filed suo motu and that there was no concealment can not be accepted. There was a deliberate concealment and/or filing of false return. Penalty rightly imposed. Revenue’s appeal is allowed with costs of Rs. 25,000.


2.         Commissioner of Income tax, Delhi-iv vs. Escorts Finance Ltd. (2009):


Section 271(1)(c) of the Income Tax Act, 1961 Penalty – For concealment of income. Whether if claim made in return of income appears to be ex facie bogus, it would be treated as a case of concealment or furnishing of inaccurate particulars and penalty proceedings would be as a case of concealment of furnishing of inaccurate particulars and penalty proceeding would be justified. Held, yes-Assessee Company was a finance company. In its return of income for relevant assessment year, it had claimed deduction under section 35D relating to public issue of shares and 50 per cent of entertainment expenses on account of employee’s participation in business meetings while entertaining company’s guests.


3.         UCO Bank, Regional Office Vs. Union of India (2009)


Writ – Maintainability – Clearance from Committee on Disputes – Writ petition preferred by bank against the IT Department seeking to quash the notice under s.226(3) issued by TRO to the bank directing it to deposit the sale proceeds of the defaulter’s property which was under attachment with the Department. It is not a matter for the High Power Committee to decide. Therefore, Single judge was not justified in holding that a High Power Committee has to be constituted to resolve the dispute.


4.         ATS Infrastructure Ltd. vs. Commissioner of Income Tax [2009]


Section 127 of the Income-tax Act, 1961-Income-tax authorities-Power to transfer cases- Assessee’s cases were transferred from Delhi to Meerut by an order under section 127 on ground that a search was conducted in cases of ATS group which included assessee’s case as well and there being an intimate connection between assessee and said group, it was necessary that cases be centralized with Assessing Officer handling other cases of group-Assessee filed writ petition challenging transfer of its cases-Whether, on facts, there being no material to come to conclusion that decision to transfer asssessee’s cases out of Delhi was mala fide, writ petition was liable to be dismissed – Held, yes.


5.         Income Tax Officer Vs. Orbital Communications (P) Ltd. (2009)


Income – Cash credit – Share application money – Amount received as share application money added as unexplained income by AO despite assessee furnishing details of the share applicant, her PAN, copy of IT return, bank statement, etc. Said share applicant on income tax assessee. Amount in question figuring in the balance sheet of the share applicant. Addition not sustainable solely on the ground that the share applicant was not produced before the AO by the assessee. CIT justified in deleting the addition.


6.         Commissioner of Income Tax Vs. Greenworld Corporation (2009)


Section 263 provides for a revisional power. It has its own limitations. An order can be interfered suo motu by the said authority not only when an order passed by the AO is erroneous but also when it is prejudicial to the interest of the Revenue. Both the conditions precedent for exercising the jurisdiction under s. 263 are conjunctive and not disjunctive. An order of assessment passed by an ITO, therefore, should not be interfered with only because another view is possible. The CIT, however, has specified a number of reasons in support of its order.


7.         CIT Vs. Chemplast Sanmar Ltd. & Ors. (Mad) (2009)


Credit under s.115JAA should be given effect to before charging of interest under ss/. 234B and 234C. In re: CIT Vs. Jindal exports Ltd. & Ors. (2009)


8.         Shanti Ram Mehata Vs. Assistant Commissioner of Income Tax (2009)


Business expenditure – Disallowance under s. 40A(3) – Multiple payments to same party on a single day. Each payment below rs.20,000. AO made disallowance under s. 40A(3) on the ground that the total payments of one day exceeded Rs.20,000. Not justified. Disallowance under s. 40A(3) is applicable for each payment and not for the aggregate of the various payments made to same party during one day. Thus, disallowance can not be sustained.


9.         J.C. Bansal, Chief Engineer, Kanoria Sugar & General Mfg. Co. Ltd. Vs. Tax Recovery Officer (2009)


TDS – assessee in default – Tax duly paid by payee. Tax on the amount received under licence having been paid by the licensor payee and evidence of the same having been furnished before CIT(A), CIT(A) was justified in holding that tax could not be recovered once gain from the assessee.


10.       Ganges Lines (India) Pvt. Ltd. Vs. Dy. CIT(Mumbai) (2009)


Appeal (Tribunal) – Rectification under s. 254(2). Suo Motu rectification vis-à-vis subsequent Supreme Court decision. In view of subsequent decision of Supreme Court holding that proviso to s.113 was clarificatory and the levy of surcharge was retrospective in nature, order of Tribunal deleting levy of surcharge suffered from mistake apparent from record. Mistake apparent rectified suo motu by Tribunal while disposing of miscellaneous application of assessee and levy of surcharge held justified. Tribunal is bound to correct such mistake even if no petition is moved from either side.


11.       Commissioner of Income Tax Vs. Parnoy Roy & ANR. (2009)


Interest under s. 234A. Chargeability – Tax paid before the due date though return filed late. Assessee having paid the tax before the due date of filling of return which ws not less than the tax payable on the returned income which has been accepted, interest under s. 234A is not chargeable or delayed filing of return.


12.       Commissioner of Income Tax Vs. A.G. Granites P. Ltd. [2009]


Rectification of mistakes – Interest income offered by assessee under head “Other income” sought to be assessed under head “Income from Other Sources” – Debatable Issue – Not to be rectified under Section 154 – Income Tax Act, 1961, s. 154.


13.       Commissioner of Income Tax Vs. Hughes Escorts Communications Ltd. (2009)


Business Expenditure – Previous year - Year in which expenditure is deductible. Business – Difference between setting up and commencement of business. Business of satellite business communication. Purchase order for equipment in July, 1994. Installation of equipment completed in March, 1995. Business set up in July, 1994. Expenditure on equipment deductible in Assessment Year : 1995-96- Income Tax Act, 1961, s. 2(34).


14.       P.S. Kapur Vs. Assistant Commissioner of Income-Tax [2009]


Section 43(5) of the Income-tax Act, 1961 – Speculative transaction – Whether insertion of clause (d) in proviso to section 43(5) vide Finance Bill, 2005, with effect from 1.4.2006 is clarificatory in nature and, therefore, it has retrospective operation – Held, yes.


15.       Commissioner of Income- Tax Vs. Woodward Governor India P. Ltd. [2009]


Business Expenditure – Mercantile System of Accounting – Loan taken for revenue purposes – Additional liability arising out of fluctuation in rate of exchange - Allowable in year of increase in rate – Income – Tax Act, 1961, ss. 28,29,37,145. o Depreciation – Actual cost – Imported assets acquired in foreign currency – Fluctuation in rate of exchange – Adjustment can be made at each date of balance-sheet pending actual payment – Income-Tax Act, 1961, ss. 32,43,43A


16.       Mimosa Investment Co. Vs. ITO (2009)


Section 271(1)(c) – When Assessing Officer recalculates total income in accordance with law and such total income is different from that calculated by the assessee, there is no concealment of particulars of income or furnishing of inaccurate particulars of income or deemed concealment in accordance with Explanation 1 to Section 271(1).


17.       Commissioner of Income Tax Vs. Contimeters Electrical (P) Ltd. (2009)


Revision – Validity – Revision on issue not mentioned in show- cause notice- Not permissible –

Commr. of Customs Vs. Toyo Engg. India Ltd. (2006) 7 SSC 592 applied _ Chandi Ram Vs. Commissioner of Income-Tax [2009]312 ITR 139(P & H) : Capital Gains – Charge of Tax – Compulsory Acquisition of Property – Enhancement of Compensation – Dispute Regarding Enhancement – Amount Assessable only in year of final award – Income – Tax, 1961, s. 45(5)(b).


18.       Commissioner of Income Tax Vs. Varinder Agro Chemicals Ltd. (2009)


Business expenditure – Capital or revenue expenditure – Expenditure on computer software – There is nothing to show that the software used by the assessee is of enduring nature and will not become outdated – Therefore, expenditure on computer software rightly allowed as revenue expenditure – No substantial question of law arises.


19.       Commissioner of Income Tax Vs. Jyoti Prabha Society (2009)


Charitable trust – Exemption under s. 11 – Income from letting out building – Assessee charitable society registered under s. 12A could not be denied exemption under s. 11 on the ground that its activity of letting out building to other society to run educational institution did not constitute charitable purpose because such rental income was again being utilized for imparting education by maintaining and constructing new buildings for same purpose.


20.       Arya Global Connect Ltd. Vs. Assisstant Commissioner of Income Tax (2009)


Business income – Business loss – Obsolete stock written off – Complete details and break-up of obsolete items and value thereof furnished by the assessee – Also, method followed by the assessee was the same as in past – Therefore, AO was not justified in disallowing the claim of write off without pointing out as to how the write off was not correct or bona fide.


21.       Travancore Cements Ltd. Vs. Assistant Commissioner of Income-tax [2009]


Section 147, read with section 148, of the Income – tax Act, 1961 – Income escaping assessment – Non-disclosure of primary facts – Assessment years 2000-01 and 2001-02 – Whether Assessing Officer gets jurisdiction under section 147 to assess or reassess income which has escaped assessment only after sub-section (2) of section 148 is complied with, i.e`., when reasons for issuing such notice have been recorded – Held, yes-


Whether when proceedings under section 147 have been initiated in respect of one item of income for which Assessing Officer had already recorded reasons, it is necessary for him to record reasons for assessing or reassessing any other items of income which are totally unconnected with proceedings already initiated – Held, yes


Whether in reassessment proceedings, Assessing Officer can make any fishing enquiry in concluded matters unconnected with issue on basis of which proceedings under section 147 have been initiated – Held, no


22.       Commissioner of Income Tax vs. Smt. Jyoti Devi (High Court of Rajasthan) (2008)


Reassessment – Change of opinion - Assessment under s. 143(1)(a) – A.O. issued notice under s. 148 on the ground that there was under assessment of income inasmuch as tractors being agricultural implement, depreciation was wrongly allowed to the assessee – Revenue could not point out any information or material which had subsequently come to the notice of the A.O. to enable him to form the requisite belief that any income liable to be assessed had escaped assessment –


Therefore, it was rightly held that the reopening of assessment was based merely on a change of opinion about admissibility of claim of depreciation on tractors, and the initiation of reassessment proceedings was not valid.


23.       Commissioner of Income Tax vs. Gold Coin Health Food P. Ltd.(2008)


Penalty-Concealment of Income-Provision for imposing penalty even if after addition of concealed income there was no positive income-Is clarificatory and retrospective in nature-Applies with effect from April 1, 1976 – Income tax Act, 1961, s. 271(1)(c)(iii), Expln.4 – Circular no. 204, dated 24, 1976.


24.       BHPE KINHILL Joint Venture Vs. Additional Director of Income Tax ( 2008)


Assessment- Notice- Service of Notice- Plea that notice had not been received-Onus on Revenue to prove proper service of notice – No such proof- Assessment not valid – Income tax Act, 1961, s. 143


25.       Commissioner of Income-tax, Delhi-IV vs. HCL Comnet Systems & Services Ltd. ( 2008)


Section 115JA of the Income tax Act, 1961- Minimum alternate tax- Assessment year 1997-98- Whether provision for bad and doubtful debts made by assessee in its profit and loss account is an ascertained liability and therefore, cannot be included in its book profits under section 115JA- Held, yes.


26.       Delhi Cloth & General Mills Co. Ltd. vs. Commissioner of Income tax ( 2008)


Section 37(1) of the Income Tax Act, 1961 – Business expenditure – Allowability of – Whether expenses incurred on foreign tour of director of assessee-company, who visited abroad as a member of Federation of Indian Chambers of Commerce, was in nature of an admissible deduction – Held, yes.


27.       Commissioner of Income tax, Delhi-II vs. Jai Parabolic Springs Ltd. (2008)


Section 37(1) of the Income Tax Act, 1961 – Business expenditure – Allowability of – Assessment year 1990-91 – Whether revenue expenditure, which is incurred wholly and exclusively for purpose of business, must be allowed in its entirety in year in which it is incurred even if assessee has written it off in his books over a period of a number of years- Held, yes.


28.       Commissioner of Income Tax Vs. Mysore Breweries Ltd (2009)


Company-Book profit under s.115JB – Provision for diminution in the value of assets. In view of retrospective insertion of cl. (i) in Expln. 1 to s. 115JB w.e.f. 1st April, 1998, by Finance (No.2) Act, 2009, the amount set aside as provision for diminution in the value of assets is to be added back for computation of book profit under s.115JB.


29.       ITO Vs. Takshila Distributors (P) Ltd. (2009)


Subsequent material collected during the course of reassessment proceedings can not be taken into account and validity of reassessment is to be judged on the basis of material available at the time of issuance of notice under s. 148. The AO in the reasons recorded has not referred to any material. In fact he had no material to have reasons to believe that income of the assessee had escaped assessment. There was no application of mind and notice of reassessment was issued in a casual manner. The situation did not improve before the CIT who granted approval under s. 151. No material is available to give any sort of basis of alleged escaped income. Mere references to the bank account which already stood disclosed to the Revenue authorities, without pointing to any entry which was false or hawala and without giving basis for such inference, it is not possible to hold that jurisdiction under s. 147 was validly exercised. No detail, whatsoever is available in the reasons recorded to have reasons to believe that income in the hands of the assessee had escaped assessment. The Departmental Representative referred to subsequent enquiry and to the report of Dy. Director of IT(Inv.). The abovesaid material is not shown to have been available and used by the A.O to initiate reassessment proceedings and to issue notice under s.148. Therefore, on facts and circumstances of the case, jurisdiction to make reassessment proceedings and to issue notice under s. 148. Therefore, on facts and circumstances of the case, jurisdiction to make reassessment was not validly assumed. The reassessment proceedings are quashed and held to be bad in law.


30.       Commissioner of Income Tax Vs. Rajesh Kumar Sharma (2009)


Reassessment – Notice – Service – Requirements – Notice received by person other than assessee. NO material to show that he was authorized. Assessee not in receipt of notice. Onus on revenue to prove deemed receipt not discharged.


31.       Citizen Co-operative Bank Ltd. Vs. Additional Commissioner of Income Tax (2009)


Deduction under s. 80P(2)(a)(i) – Business of banking - Income from banking business of co-operative bank – Income of co-operative bank from banking business with members as also nonmembers is allowable deduction under s. 80P(2)(a)(i) – Condition of business with members was attached with regard to providing credit facilities only – This condition was also fulfilled because before any loan was disbursed to any person, the borrower had to become member of the assessee bank – Further, assessee was functioning under the control and supervision of RBI and as per license granted by RBI, which allowed lending of money both to members as also non-members.


32.       Commissioner of Income Tax vs. Combustion Engineering Inc. (USA) (2008)


Appeal (Tribunal) – Maintainability – Clearance from Committee on Disputes – For maintaining an appeal by the Department before the Tribunal, it is not necessary to obtain clearance from the Committee on Disputes where the assessee is a nonresident company assessed through a public sector undertaking as agent of non-resident – Tribunal was not justified in rejecting the appeal of the Department against non-resident company, who was represented for purposes of assessment by a public sector undertaking, on the ground that clearance from Committee on Disputes was not obtained – Tribunal directed to restore the appeal and decide the same on merits.


33.       Jai Bharat Maruti Ltd. Vs. CIT(Del) (2009)


Reassessment-Scope- Addition in respect of item totally unconnected with reason to believe – Is Invalid - - AO had proceeded to issue a notice under s. 148(1) by recording reasons that assessee’s income chargeable to tax had escaped assessment by virtue of the fact that the assessee had charged to its P & L a/c, the closing balance in the sum of Rs.25 lacs (approx.) appearing in its Modvat account. By notice under s. 142(1) dt. 8th Jan., 1999 A.O called upon the assessee to file its return. Howeve , by the second notice, dt. 10th March, 1999 he asked the assessee to show cause as to why certain items of income and expenditure (which were unconnected to the aspect of the assessee debiting the sum of RS.25 lacs lying the Modvat account to the P & L a/c) 7should not be added or disallowed. Same not permissible. Items referred to in the A.O’s notice dt. 10th March, 1999 had no relation with the reasons recorded on 27th March, 1997. Assessment order insofar as it dealt with items other than those which formed the basis of the reasons disclosed on 27th March, 1997 is bad in law and liable to be quashed.


34.       M. Shivanna Vs. Deputy Commissioner of Income Tax (High Court of Karnataka) (2008)


Recovery – Stay – Opportunity of being heard – Respondent has rejected the request of the petitioners seeking stay of demand and also issued a communication – cum-order directly to the manger of bank for attachment of debt under s. 222, by a non-speaking order and without affording any opportunity of hearing to the petitioners- Not justified


Respondent being a statutory authority has to pass an order exercising the power as envisaged under the statute and in strict compliance with the relevant provision of the Act and Rules and after affording reasonable opportunity to the petitioners – Therefore, impugned order and the directions are set aside and the matter is remitted back to the respondent for reconsideration afresh.


35.       Scm Creations Vs. Assistant Commissioner of Income Tax (2008)


Export – Special Deduction- Computation – Relief under section 80IA- Not Deductible from profits and gains of business before computing relief under section 80HHC – income tax Act, 1961, ss. 80HHC, 80IA.


Best Regards

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Ankur Garg
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