Tuesday, 21 July 2015

Five Imp Verdicts On Bogus Purchases, Penalty, Cash Credits, Loose Paper Additions Etc

Shoreline Hotel Pvt. Ltd vs. CIT (ITAT Mumbai)

Bogus purchases: Manner of computing profits in the case of bogus purchases by an assessee who is not a dealer in the goods but has consumed the goods in his business explained

As per our considered view, since the purchases so made were not sold by the assessee, the AO was not justified in estimating 15% profit on such bogus purchases. However, such bogus purchases/expenses were going to reduce the assessee’s profits by the equal amount of such expenses and not only by 15% as taken by the AO. It was not a case where purchases so made were actually sold by the assessee. Where assessee is found to have sold the goods out of the bogus purchases, under those circumstances it is reasonable to estimate profit out of such sales so as to make appropriate addition. However, in the instant case the assessee was engaged in the business of hotel wherein the expenditure alleged to be incurred on plumbing, electrical items, furniture, printing and stationary etc appears to have reduced directly the profit earned by assessee


Ketan V. Shah vs. ACIT (ITAT Mumbai)

S. 132(4A) presumption does not apply to loose papers found in some other person's possession. While the AO can make a protective assessment, the appellate authority cannot confirm a protective order. It has to either make it substantive or quash it

It is settled that when there is a doubt as to which person amongst the two was liable to be assessed, parallel proceedings may be taken against both and alternative assessments may also be framed. It is also equally true that while a protective assessment is permissible, it is not open to the income-tax appellate authorities constituted under the Act to make a protective order


Parin K. Rajwani vs. JCIT (ITAT Mumbai)

S. 271D penalty: The limitation period has to be computed from the date of issue of the show-cause notice by the AO. Penalty should be levied if circumstances show no intention to contravene the law

The six month period for the purpose of clause (c) of section 275(1) of the Act is to be computed from the date of issue of first show cause notice by the AO and not from the date of issue of first show cause notice issued by the Joint Commissioner


KLR Industries Ltd vs. DCIT (ITAT Hyderabad)

S. 68: If the assessee has furnished the details of the creditors with their PAN, the onus is on the AO to examine their credit-worthiness and source of payment to assessee

If at all the A.O. or CIT(A) had any doubt with regard to creditworthiness of the creditors, it should have triggered an enquiry by the A.O. to find out the real facts. When the identity of the creditors along with their income tax particulars including PAN and assessment details were available with the A.O. it would not have been difficult on the part of the A.O. to verify their bank accounts and other details to ascertain whether the advances were from explained sources. Even the A.O. could have taken up the issue with the concerned A.Os with whom the creditors are assessed


Color Craft vs. ITO (ITAT Mumbai)

S. 282B: Law on validity of service of notices by "Speed Post" instead of "Registered Post A/D" explained

Registered post would take within its sweep not only ‘speed post’ but also all other mails forming part of the establish system of mails in which their receipt and movement is recorded to assure safe delivery. All the principal attributes of ‘registered post’ were inherently present in ‘speed post’, so that the two were of the same genus. The term registered post being not defined, it could only be so in terms of its elements, which the tribunal gathered from the dictionary meaning of the word ‘registered’; its common parlance meaning; and its substance

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