Lawyers presumed to Know law, not judges

There is presumption in law that lawyer knows the law but there is no absolute presumption that a judge should know the law. A Judge is only called upon to balance the two sides of an argument presented before him

J. Rajiv Narain Raina in Punjab and Haryana High Court in Nirmal Singh and Others vs. Tarsem Singh and Others [CR No. 3791 of 2013 (O&M) dated 01-05-2014]

Introduction of a new entry and inclusion of certain services in that entry would pre-suppose that there was no earlier entry covering the said services

Bombay High Court in the case of Indian National Shipowners' Association-v.-Union of India, 2009 (14) STR 289, at paragraph 38 of the judgment, held in the context of the Finance Act, 1994 that introduction of a new entry and inclusion of certain services in that entry would pre-suppose that there was no earlier entry covering the said services

Supreme Court in S.V.R. Mudaliar v. Rajabu F. Buhari [1995] 4 SCC 15 held as follows:— "…we have no doubt in our mind that before reversing a finding of fact, the appellate court has to bear in mind the reasons ascribed by the trial court. This view of ours finds support from what was stated by the Privy Council in Rani Hemanta Kumari Debi v. Maharaja Jagadindra Nath Roy Bahadur [10 CWN 630 : 8 Bom LR 400] wherein, while regarding the appellate judgment of the High Court of Judicature at Fort William as "careful and able", it was stated that it did not "come to close quarters with the judgment which it reviews, and indeed never discusses or even alludes to the reasoning of the Subordinate Judge".

A Court of appeal interferes not when the judgment under attack is not right but only when it is shown to be wrong. (See Special Land Acquisition Officer, Bangalore v. T. Adinarayan Setty [1959 Supp 1 SCR 404 : AIR 1959 SC 429 : 1959 Cri LJ 526] ;Dattatraya Shankarbhat Ambalgi v. Collector of Sholapur [(1971) 3 SCC 43] and Dollar Company, Madras v.Collector of Madras [(1975) 2 SCC 730] .)

A donor cannot be expected to disclose or answer any question which was not specifically put to him in the course of proceedings u/s.131. The inspector deputed by the assessing officer had full opportunity to make inquiry and the assessee should not suffer on account of a lapse on the part of the inspector. [Para 14 of the Judgement] Prahlad Bhattacharya [2016] 71 taxmann.com 63 (Calcutta) MARCH 4, 2016

Ratan Melting & Wire Industries, 2008 (12) STR 416. At paragraph 6 of the judgment, the Hon'ble Apex Court observed as follows "6. Circulars and Instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the Circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Govt. and/or the State Govt. are not concerned they represent merely their understanding of the statutory provisions. They are not binding upon the Court. It is for the Court to declare what the particular provision of statutes says, and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law

Old and Gold Rule of Law reiterated by Calcutta High Court in Sheo Kumar Mishra [2016] 70 taxmann.com 375 (Calcutta) FEBRUARY 26, 2016 that In the absence of an appeal or cross-objections by the department against the order in dispute, the Appellate Tribunal will have no jurisdiction or power to enhance the assessment. Under Section 251, CIT A has power to enhance the assessment but u/s 253 Tribunal does not have the power to enhance the enhancement. it is not open to the Tribunal itself to raise a ground or permit the party, who has not appealed, to raise a ground, which will work adversely to the appellant

Facts and Decision

Inordinate delay in release of Judgment

1.     As per Supreme Court in Kanwar Singh vs. Thakur Ji Maharaj , in ordinate delay in itself is sufficient  to set aside the judgment without going into the merits of the case.

2.     Supreme Court in Bhagwan Das Fateh  Chand Baswani held that long delay in releasing the judgment gives rise to unnecessary speculations.  The Court added that :”the party whose appeal is ultimately dismissed may justifiable fear that the arguments raised at the Bar may not have been reflected upon or appreciated by the Court at the time of dictating the Judgment”. Hence the apex Court dismissed the Madras Court Judgments kept reserved for five years.

3.     Supreme Court in Anil Rai vs. State of Bihar (2001) 7 SCC 348 laid down certain guidelines to be observed by High Court and Others

4.     Apex Court in Suheli Leasing and Industry Ltd (2010) 36 PHT 267 held that after the arguments are concluded, an endevour should be made to pronounce the Judgment at earliest and in any case not beyond a period of three months. Keeping it pending for long time sends a wrong signal to the litigants and the society.

5.     In Shiv Sagar Veg Restaurant 176 Taxman 260(Bom) order of ITAT was set aside because there was in ordinate delay of 4 months

6.     Haryana Tax Tribunal in Punj Llods 48 PHT 89(HTT) taking a serious note of inordinate delay set aside the impugned order.

Comments

7.     As per Rule 34(5) of ITAT Rules

 The pronouncement may be in any of the following manners :—

          (a)  The Bench may pronounce the order immediately upon the conclusion of the hearing.

          (b)  In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement.

          (c)  In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board.

Observations of ITAT Mumbai in Times Guaranty Ltd.(ITA 1681/M/2007) dtd 15-04-2015 on

Exception and Extraordinary Circumstances “of the case”

“…………..the inference that can be drawn that the relevant factors such as complexity of the matter, number of issues involved, lengthy arguments and discussions involved or the issue being of such importance that it requires more time and efforts, difference of opinion between the adjudicating members on some issue which require more discussion etc. can be safely said to be ‘exceptional and extraordinarily circumstances of the case.’ The factors/ circumstances such as one or both the concerned Member being on leave or his/their non availability for some reason for a particular period , his occupation in some other work of equal importance as may be entrusted by the Hon’ble President of the ITAT or due to the reason that the concerned Member/Members could not spare time because of hearing or in making decision in any other factually lengthy or involving complicated issue or of the nature which require a lot of time to get to the conclusion of the matter would also fall within the purview of the above stated phrase. It cannot be assumed that such exceptional and extraordinarily circumstances of the case would mean happening of any event which is never heard or seen or which is rarely seen to happen

………………………………………….

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Even, if the pronouncement of the order, for certain reasons, could not be done within the period of 90 days, there is a convention to seek the permission of the Hon'ble President for pronouncement of the same even after the period of 90 days. The above said conventions are being followed not under any statutory rules or regulations but because of the own devised procedure/convention of the Tribunal for the sake of quick disposal of the cases.

We may further point out that it is also the practice/convention that if the pronouncement of the matter is delayed for certain reasons for a considerable period, the matter is refixed for clarification so that the relevant points be refreshed in the memory and if so required matter can be heard afresh. This all depends upon the satisfaction of the Bench itself as to whether it is in a position to pronounce the order or that some clarifications are required or that a fresh hearing is required.

Further the word 'ordinarily' as mentioned in clause (c) of rule 34(5) is sufficient to explain that the period of further 30 days beyond the period of 60 days from the date of hearing, is not the end point and in special circumstances, order can be pronounced beyond the such further period of 30 days also. Reliance in this respect can be placed on the another decision of the Tribunal in the case of "Gift Holding (P.) Ltd. vs. Income-tax Officer" [2012] 18 taxmann.com 103 (Mum.),

The binding effect of a decision of Supreme Court does not depend upon whether. a particular argument was considered therein or not, provided that the point with reference to which an argument was subsequently advanced was actually decided.

Smt. Somavanti v. State of Punjab [1963] 2 SCR 774 and T. Govindraja Mudaliar v. State of Tamil Nadu [1973] 3 SCR 222.

Supreme Court in Kathiroor Service Cooperative Bank Ltd.[August 27, 2013.] on Scope of 133(6)

The appellant-assessee is a Service Co-operative Rural Bank. The Income Tax Officer to the assessee under Section 133(6) of the Act calling for general information regarding details of all persons (whether resident or non-resident) who have made (a) cash transactions (remittance, transfer, etc.) of Rs. 1,00,000/- and above in any account and/or (b) time deposits (FDs, RDs, TDs, etc.) of Rs. 1,00,000/- or above for the period of three years between 01.04.2005 and 31.03.2008, dated 02.02.2009. It was expressly stated therein that failure to furnish the aforesaid information would attract penal consequences. The assessee objected to the said notice on grounds, inter alia, that such notice seeking for information which is unrelated to any existing or pending proceeding against the assessee could not be issued under the provisions of the Act and requested for withdrawal of the said notice Section 133 provides for the power of authorities under the Act to call for information for the purposes prescribed therein. Sub Section (6) of Section 133 of the Act, as it stood originally, had provided for calling for information in relation to such points or matters which would be useful for or relevant to any proceeding under the Act from any person including a banking company or any officer thereof. It was settled law that unless a proceeding is pending, the powers under Section 133(6) could not be exercised by the Assessing Authorities. In such circumstances, an amendment was made by the Finance Act, 1995 (Act 22 of 1995), with effect from 01.07.1995, inserting the words “enquiry or” before “proceeding” in Section 133(6) and the second proviso to the said provision The addition of the word “enquiry” expanded the ambit of exercise of powers by the authorities under Section 133(6) to seek for information which would be useful for or relevant to any enquiry besides proceeding under the Act. The second proviso to Section 133(6), specified that the power in respect of an enquiry, in case where no proceeding is pending, shall not be exercised by any income tax authority below the rank of Director or Commissioner without the prior approval of the said authorities. The effect of the amendments made by the Finance Act (Act 22 of 1995) was explained by the CBDT in the Circular No. 717, dated 14th Aug., 1995 (See Taxmann ’s Direct Taxes Circulars, Vol. 4, 2002 Ed., p. 2.1759, 2.1782) as follows : At present the provisions of sub-section (6) of section 133 empower income-tax authorities to call for information which is useful for, or relevant to, any proceeding under the Act which means that these provisions can be invoked only in cases where the proceedings are pending and not otherwise. This acts as a limitation or a restraint on the capability of the Department to tackle evasion effectively. It is, therefore, thought necessary to have the power to gather information which after proper enquiry, will result in initiation of proceedings under the Act. 41.3 With a view to having a clear legal sanction, the existing provisions to call for information have been amended. Now the income-tax authorities have been empowered to requisition information which will be useful for or relevant to any enquiry or proceedings under the Income-tax Act in the case of any person. The Assessing Officer would, however, continue to have the power to requisition information in specific cases in respect of which any proceeding is pending as at present. However, an income-tax authority below the rank of Director or Commissioner can exercise this power in respect of an inquiry in a case where no proceeding is pending, only with the prior approval of the Director or the Commissioner. Since the language of the Section 133(6) is wholly unambiguous and clear, reliance on interpretation of statutes would not be necessary. Before the introduction of amendment to Section 133(6) in 1995, the Act only provided for issuance of notice in case of pending proceedings. As a consequence of the said amendment, the scope of Section 133(6) was expanded to include issuance of notice for the purposes of enquiry. The object of the amendment of section 133(6) by the Finance Act, 1995 (Act 22 of 1995) as explained by the CBDT in its circular shows that the legislative intention was to give wide powers to the officers, of course with the permission of the CIT or the Director of Investigation to gather general particulars in the nature of survey and store those details in the computer so that the data so collected can be made use of for checking evasion of tax effectively. The assessing authorities are now empowered to issue such notice calling for general information for the purposes of any enquiry in both cases: (a) where a proceeding is pending and (b) where proceeding is not pending against the assessee. However in the latter case, the assessing authority must obtain the prior approval of the Director or Commissioner, as the case maybe before issuance of such notice. The word “enquiry” would thus connote a request for information or questions to gather information either before the initiation of proceedings or during the pendency of proceedings; such information being useful for or relevant to the proceeding under the Act

It is settled position in law that the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what logically flows therefrom as held by the Supreme Court in Ambica Quarry Works Vs. State of Gujarat, 1987(1) SCC 213

Cross objection before ITAT may be filed on the issues decided against the assessee or to support the order passed by CIT A. Where Cross objection is in support of CIT A order, it shall stand dismissed along with revenue’s appeal due to low tax effect circular because it has no independent existence. However if cross objection is filed against some part of the order of CITA, it can not be dismissed along with dismissal of appeal of revenue due to low tax effect circular. Contention that appeal stands dismissed in limine is illogical in such situation. Ajay Kalia[2016] 66 taxmann.com 99 (Delhi - Trib.) JANUARY 7, 2016

There can be one possibility when the cross objection is filed by the other side in support of the order passed by the CIT(A) and the other possibility can be of filing CO against the issues decided against it in the impugned order. There can be still one more possibility when the other side, apart from supporting the impugned order appealed against, may also assail certain other issues decided against it. This divulges that the CO can be filed by the other side, on receipt of notice of appeal having been filed by the appealing party, on any issue de hors the issued raised by the appealing party.

Punjab and Haryana High Court in Himalaya Construction (P.) Ltd SEPTEMBER 3, 2015 [2015] 64 taxmann.com 373 (Punjab & Haryana) held that order passed without considering the overall material on record including the reply to the show-cause notice submitted by the petitioner and without detailed reasons on the issues regarding the jurisdiction of the adjudicating authority is against the principles of natural justice and there fore can be set aside in writ jurisdiction despite alternate appeal remedy

Decades long Controversy over defining “Month “ whether Calender Month or Lunar Month

The word “month” has been mentioned in the Income tax law in number of provisions. However the term has not been defined in the Income tax law. Interpretation of the term poses number of issues especially in the interest calculation. However to understand the controversy around it, we shall have to start the journey from genesis as under:

“………… The Supreme Court in Commr. of Agrl. IT vs. The Plantation Corporation of Kerala Ltd. (2000) 164 CTR (SC) 502 : AIR 2000 SC 3714 was concerned with whether the "Explanation" at the bottom of s. 5 of the Agrl. IT Act applied to the entire section or to only one of the clauses thereof. It was held that an Explanation below a particular clause/sub-section is intended to be an Explanation to that specific or particular clause/sub-section but when at the bottom of the section, is generally meant to explain the entire section……………”Quoted in Bagri Foundation 344 ITR 0193 (Delhi High Court)

Voice recorded CDs are documents under evidence Act Held by SC in Shamsher Singh Verma CRIMINAL APPEAL NO. 1525 OF 2015 (Arising out of S.L.P. (Crl.) No. 9151 of 2015)24-11-2015

“………..11. Word “document” is defined in Section 3 of the Indian Evidence Act, 1872, as under: - “ ‘Document’ means any matter expressed or described upon any substance by means of letters, figures or marks, or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter

Supreme Court on technological advancements in Oracle Software India Ltd. 320 ITR 546(SC) “………Technological advancement in computer science makes knowledge as of today obsolete tomorrow. We need to move with the times.[Para 7]………………………….. “…………..The Department needs to take into account the ground realities of the business and sometimes over-simplified tests create confusion, particularly, in modern times when technology grows each day[Para 11]…………………..”

SC in Zuari Estate Development & Investment Company Limited has held that intimation u/s 143(1) is not assessment and hence while issuing notice u/s 148 there is no change of opinion and hence notice is valid. Bombay High Court Judgement is set aside and matter restored to ITAT to decide on merits. Comments : In this case the notice u/s 148 was issued for not reflecting capital gain u/s 2(47)(v) rws 53A of Transfer of Property Act in respect of an agreement entered in 1984 by which property was stipulated to be transferred in 1991 only. However section 2(47)(v) has come into operation w.e.f. AY 1988-89 only and high court had held in para 18 of its judgement that “ no prudent or reasonable person, reasonably instructed in law, could have come to the conclusion that an agreement as contemplated by section 53A of the Transfer of Property Act had been entered into for the assessment year 1991-92” and that mere exchange of letters is not agreement u/s 53A. SC has not considered this part of the judgement. How shall now ITAT decide the issue ?

SC decision on 05-11-2015 on 36(1)(iii) in the case of Hero Cycles (P) Ltd. The apex court observed that interest free advance to sister concern under margin money stipulation by bank for granting of loan to sister concern qualifies the test of commercial expediency. Further loan to director from bank account out of credit balance available on the day of advance can not be said to be advance from borrowed capital. Hence no disallowance u/s 36(1)(iii). Further SC reprimanded P&H High Court for disallowance by mentioning Abhishek Industries only without mentioning facts of the case. SC followed its own judgement in SA Builders 288ITR1 for test of commercial expediency and includes expenditure incurred otherwise than by legal obligation. SC also quoted Malyalam Plantation 53 ITR 140 which held that “for the purpose of business” is wider than “for the purpose of earning profits” SC further quoted Delhi High Court in Dalmia Cement 254 ITR 377 which held that for the purpose of business need not necessarily mean the business of assesee itself. SC also held that the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman.

An appeal is a continuation of assessment proceedings. Assessment proceedings complete when appeal against order of assessment is decided by Tribunal CIT vs. Mayur Foundation (2005) 274 ITR 562(Guj.)