Bombay High Court Judgments — 2015

The High Court held that the decisions in Uco Bank, Calcutta Vs. Commissioner of Income Tax and Mercantile Bank Ltd. Vs. Commissioner of Income Tax squarely apply to the facts and issues involved in the present case. The Court found no reason to interfere with the ITAT's judgment. Regarding the issue of interest on sticky advances, the Court noted that the ITAT had relied on the observations of the Delhi High Court in M/s. Vasisth Chay Vyapar Limited, which in turn referred to the Supreme Court's decision in Southern Technologies Limited. The Court affirmed that Section 45Q of the RBI Act has an overriding effect, and thus, RBI directions are applicable to cooperative banks. The Court also observed that the CBDT circulars, particularly Circular No. F-201/81/84 dated 09.10.1984, are consistent with Section 145 of the Income Tax Act and are meant to ensure uniform administration of law, being binding on the department under Section 119. The Court found no inconsistency or illegality in the circular. For the additional issue of forfeited dividend in ITA Nos. 53/2014 and 54/2014, the Court found no error in the ITAT's observation that the unclaimed dividend represented excess provisions for dividend made earlier, which was reversed and transferred to a reserve account, and was an appropriation of post-tax profits, not a charge on profits. The Court concluded that no substantial question of law arises in these appeals.

The High Court held that the decisions in Uco Bank, Calcutta Vs. Commissioner of Income Tax and Mercantile Bank Ltd. Vs. Commissioner of Income Tax squarely apply to the facts and issues involved in the present case. The Court found no reason to interfere with the ITAT's judgment. Regarding the issue of interest on sticky advances, the Court noted that the ITAT had relied on the observations of the Delhi High Court in M/s. Vasisth Chay Vyapar Limited, which in turn referred to the Supreme Court's decision in Southern Technologies Limited. The Court affirmed that Section 45Q of the RBI Act has an overriding effect, and thus, RBI directions are applicable to cooperative banks. The Court also observed that the CBDT circulars, particularly Circular No. F-201/81/84 dated 09.10.1984, are consistent with Section 145 of the Income Tax Act and are meant to ensure uniform administration of law, being binding on the department under Section 119. The Court found no inconsistency or illegality in the circular. For the additional issue of forfeited dividend in ITA Nos. 53/2014 and 54/2014, the Court found no error in the ITAT's observation that the unclaimed dividend represented excess provisions for dividend made earlier, which was reversed and transferred to a reserve account, and was an appropriation of post-tax profits, not a charge on profits. The Court concluded that no substantial question of law arises in these appeals.

The High Court held that the ITAT's order was vitiated for failure to provide an adequate hearing. The Court noted that the Revenue did not dispute the Assessee's contention that the Tribunal did not provide an opportunity of hearing based on the additional documents produced. In the interest of justice, the Court quashed and set aside the order passed by the ITAT. The ITAT was directed to decide the appeal afresh after giving both the appellant (Assessee) and respondents (Revenue) an opportunity of being heard with regard to the additional documents. The substantial question of law was answered accordingly. All contentions of the parties on merits were left open.

The High Court declined to take a different view from the ITAT's decision, stating that all the cases were decided on facts. The Tribunal had accepted the assessee's explanation that the cash amounts received were earnest money for a property sale, rather than loans as initially disclosed by the assessee's son. The ITAT found the assessee's explanation more plausible given the harshness of Section 271 of the Income Tax Act. The High Court found no substantial question of law arising from the ITAT's order. Therefore, the appeals filed by the Commissioner of Income Tax were dismissed.

The High Court declined to take a different view from the ITAT's decision, stating that all the cases were decided on facts. The Tribunal had accepted the assessee's explanation that the cash amounts received were earnest money for a property sale, rather than loans as initially disclosed by the assessee's son. The ITAT found the assessee's explanation more plausible given the harshness of Section 271 of the Income Tax Act. The High Court found no substantial question of law arising from the ITAT's order. Therefore, the appeals filed by the Commissioner of Income Tax were dismissed.

The High Court declined to take a different view from the ITAT's decision, stating that all the cases were decided on facts. The Tribunal had accepted the assessee's explanation that the cash amounts received were earnest money for a property sale, rather than loans as initially disclosed by the assessee's son. The ITAT found the assessee's explanation more plausible given the harshness of Section 271 of the Income Tax Act. The High Court found no substantial question of law arising from the ITAT's order. Therefore, the appeals filed by the Commissioner of Income Tax were dismissed.

The High Court held that there are no substantial questions of law arising for consideration under Section 260-A of the Income Tax Act, 1961, and dismissed the appeal. The Court noted that the fact of the Assessee filing the electronically generated return on October 30, 2007, was not disputed. The sole dispute was whether the delay in the receipt of the ITR-V form by the Revenue meant the return was not filed within the time prescribed under Section 139(1). Citing the Bombay High Court's judgment in M/s. Crawford Bayley & Co. vs. Union of India, the Court emphasized that treating a return as invalid has serious consequences. The judgment highlighted that Section 139(9) provides for rectification of defects and that the Assessing Officer has powers to condone delays. The Court found no infirmity in the ITAT's reliance on this judgment, which held that merely because the ITR-V form was not submitted within 15 days, it would not by itself deny the Assessee's right to claim the return as filed within time. The Court concluded that the appeal had no merit.

The High Court held that the appeal did not raise any substantial question of law. The Court was convinced that the relinquishment deed was made pursuant to Bye-law No. 13.3 and was directly connected to the sanctioning of the building plan, with both events occurring within a short span of 4-5 days. The Court accepted the respondent's contention that this was done to obtain a sanctioned plan for the building. The Court also noted that the area under proposed roads would be useful for the project, and the open space for recreation appeared to be a facility for the residents. Relying on the CBDT Circular, the Court stated that for the purpose of Section 80-IB, the size of the plot should include the area left open compulsorily as per Building bye-laws. The Court found no reason to disturb the view taken by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. Therefore, the appeal was found to have no merit and was dismissed.

The High Court found that the contract between the appellant and the owner, and the arbitration award, were material to determine when the demurrage liability crystallized, especially given the appellant's adherence to the mercantile system of accounting. The Court noted the revenue's contention that these documents were not produced before the Tribunal. However, the appellant's counsel, on instructions, stated that all such documents, including the arbitral award and the contract, were indeed produced before the ITAT. The revenue's counsel could not dispute this. Since these documents were on record but not examined by the authorities below, the High Court deemed it appropriate in the interest of justice to quash and set aside the ITAT's order. The matter was remanded to the ITAT to decide the appeal afresh after hearing the parties in accordance with law. The substantial questions of law were answered accordingly. All contentions on merits were left open. The operative direction was to quash the ITAT's order dated 10/07/2007 and remand the appeal for fresh adjudication.

The Tribunal upheld the concurrent findings of the lower authorities, holding that the securities held by the co-operative bank under the "HELD TO MATURITY" category are to be treated as stock-in-trade. Consequently, the diminution in the value of these securities is to be treated as a loss and not a disallowable expense. The Tribunal relied on the judgments of the Bombay High Court in Commissioner of Income Tax vs. Bank of Baroda, (2003) 262 ITR 334, and the Supreme Court in UCO Bank vs. the Commissioner of Income Tax, 240 ITR 355. The Supreme Court's decision in UCO Bank clarified that merely holding securities till maturity does not make them purely investment; they can still be considered stock-in-trade for a bank. The Tribunal found the revenue's reliance on the Vijaya Bank case to be misplaced. The appeal was dismissed as it did not raise any substantial question of law.

The High Court held that in view of the settled law, there appeared to be no substantial question of law arising in these appeals. The court found no difficulty in accepting the findings recorded by the lower authorities, which had held that the amount credited to Capital Reserve was not revenue received. The reasoning is based on previous judgments of the High Court in similar matters and a judgment from the Karnataka High Court. The appeals were disposed of in accordance with this finding, effectively upholding the decisions of the CIT(A) and ITAT. No specific issue was left undecided.

The High Court held that the relinquishment deed was made pursuant to Bye-law 13.3 and was directly connected to the sanctioning of the building plan, with both events occurring within a short period. The court was convinced that the relinquishment was for the purpose of seeking a sanctioned plan for the building and that the area under proposed roads would be useful for the project, with open spaces serving as a facility for residents. The court agreed with the interpretation that the plot size for Section 80-IB(10) should include areas left open compulsorily as per building bye-laws, citing a CBDT circular. This circular clarified that the area limit of the plot should be considered with reference to the site on which the housing project is constructed, conforming to the project plan approved by the local authority, and not just the demarcation of land. The court found no merit in the appeal, upholding the view taken by the lower appellate authorities.

The High Court held that no substantial question of law arises in the present appeal. The Court noted that the appeal challenges concurrent findings of the CIT(A) and the ITAT. The ITAT had allowed the assessee's appeal, deleting the addition of Rs. 1,80,000/- that was confirmed by the CIT(A). The reasoning was that the authorities below had appreciated the evidence collected by the AO and concluded that the respondent did not conceal income or submit a fictitious return. Consequently, the appeal filed by the Department was dismissed. The operative direction was the dismissal of the appeal.

The High Court held that the Assessing Officer acted without jurisdiction in issuing the notice under Section 148 to re-open the assessment for AY 2000-01. The Court found that the reasons for re-opening were based on information that was essentially the assessee's own disclosure regarding its business activities, which had already been considered during the original assessment. The Court emphasized that for re-opening beyond four years, there must be a failure on the part of the assessee to disclose fully and truly all material facts. In this case, the disclosure was made by the assessee and was identical to what was submitted during the original assessment proceedings. Therefore, there was no failure to disclose material facts. The Court also noted that re-opening based on a mere change of opinion is impermissible. The Court referred to the decision in Hindusthan Lever Ltd. Vs. R.B. Wadkar, Assistant Commissioner of Income Tax, which stated that reasons for re-opening must be based on evidence and the Assessing Officer must establish a vital link between the reasons and evidence, which was absent here. Consequently, the impugned notice was quashed and set aside as arbitrary and issued without jurisdiction.