Gujarat High Court Judgments — 2019

The High Court held that neither of the two questions formulated by the Revenue could be termed as substantial questions of law; they were at best mixed questions of law and fact. Regarding unverifiable purchases, the CIT(A) had directed an addition of 2% of net profit, considering the consistent practice for earlier assessment years and the assessee's own case. The Tribunal affirmed this finding, noting it was consistently adopted by the department and upheld by the Tribunal in the assessee's own case for AY 2009-10. Regarding unverified sundry creditors, the Tribunal held that no further addition could be made, especially when the assessee had to receive higher amounts from paper mills shown as sundry debtors. The Tribunal found the AO was incorrect in making the addition under Section 68 and the CIT(A) was not justified in upholding it. The High Court found no error in the Tribunal's order and saw no reason to disturb it. The addition on account of sundry creditors was deleted.

The Tribunal held that the Assessing Officer's comparison of the assessee's personal capital account with the capital account of Jay Jewellers was incorrect. It reasoned that separate maintenance of books of accounts by an individual and his proprietorship concern is permissible, and capital contribution to the proprietorship can exceed personal capital if funded by other available resources. The Tribunal found that the capital account of Jay Jewellers in the assessee's books and the capital account of Jay Jewellers itself were mirror images, thus explaining the capital introduction of Rs. 1,85,65,955/-. The Tribunal also noted that the CIT(A) had raised concerns about unsecured loans totaling Rs. 8,52,58,022/- in the assessee's personal books, but no addition was made on this larger amount. Since the addition under challenge was Rs. 1,85,65,955/-, which was explained, the Tribunal deleted this addition. The High Court agreed with the Tribunal's findings, stating there was no substantial question of law and dismissed the appeal.

The High Court held that the Supreme Court's decision in Maxopp Investment Ltd. cannot be seen as fundamentally changing the understanding and interpretation of Section 14A and Rule 8D adopted by various courts. The judgment in Maxopp Investment Ltd. does not lay down a proposition that the requirement of the Assessing Officer recording satisfaction under sub-rule (1) of Rule 8D before applying the formula in sub-rule (2) is done away with. It does not mean that Section 14A read with Rule 8D is automatically attracted the moment it is demonstrated that the assessee had availed of mixed funds and utilized them for making investments into securities earning tax-free income. The Court reiterated its view in Shreno Limited that the Assessing Officer is obliged to indicate dissatisfaction with the assessee's claim before invoking Rule 8D, and this safeguard should not be overlooked. Therefore, the Revenue's submission that Rule 8D is attracted automatically once mixed funds are present was not accepted. The Court found no error in the ITAT's order and concluded that the proposed questions of law were not substantial questions of law. The appeal was dismissed.

The High Court held that none of the three proposed questions could be framed as substantial questions of law. The Court found that the issues were primarily factual and that the reasoning provided by the Tribunal was convincing. The Court was satisfied that the Tribunal had committed no error, let alone an error of law, in passing its impugned order. Therefore, the appeal filed by the Revenue was dismissed. The Tribunal's findings were upheld, implying that the CIT(A)'s deletions and restrictions were justified based on the evidence and legal precedents considered. Specifically, for the expenses, the Tribunal found the CIT(A)'s restriction to be without justification and the assessee's arguments regarding the AO's casual approach and lack of specific defects in audited accounts persuasive. For sundry creditors, the Tribunal agreed with the CIT(A) that additions based on suspicion without concrete material were unsustainable, especially after the CIT(A) had verified transactions and received confirmations. For bank deposits, the Tribunal found that the amounts were explained as advances from buyers and were part of the sundry creditors, thus not unexplained deposits, a finding not controverted by the Revenue.

The High Court held that the issue was squarely covered by its previous decision in the case of CIT vs. Gujarat State Road Transport Corporation, 265 CTR 64. In that judgment, the Court had observed that when an employer has not credited the sum received as employees' contribution to the employees' account in the relevant fund on or before the due date prescribed in the explanation to Section 36(1)(va), the assessee is not entitled to a deduction. The Tribunal had relied on this decision to uphold the disallowance. The High Court noted that the matter was pending before the Hon'ble Supreme Court. Consequently, the appeal was dismissed. No specific finding was recorded on the second question as the appeal was dismissed on the strength of the precedent.

The High Court held that both questions raised by the Revenue were no longer res integra, as they were covered by the Court's own decision in Principal Commissioner of Income Tax 2, Vadodara vs. Gujarat Cop, Op. Milk Marketing Federation Ltd. [Tax Appeal No.1266 of 2018], decided on October 22, 2018. The Court noted that in the prior case, it had observed that neither the Commissioner (Appeals) nor the Tribunal had fully addressed the capital nature of the expenditure, focusing instead on its allowability as business expenditure. The Court, however, examined the details of the programme, which involved activities aimed at improving fertility among milk animals by addressing issues like improper calf rearing, low body weight, lack of nutrition, poor health, and lack of farmer awareness. Activities included awareness camps, animal tagging, fertility camps, deworming, mineral mixture distribution, vaccination, and providing balanced cattle feed. The Court concluded that this expenditure was general in nature, aimed at improving business practices for better fertility, and not directly relatable to specific tangible returns. Consequently, the expenditure was considered for the purpose of business and not capital in nature. The Supreme Court's dismissal of the Revenue's SLP in the prior case further solidified this position. Therefore, the appeal was dismissed.

The High Court held that both issues were squarely covered by its previous decision in Tax Appeal No. 900 of 2018 and allied appeals, decided on July 31, 2018. Regarding the first issue concerning Section 14A, the Court referred to its earlier finding that in cases where the assessee has sufficient interest-free funds exceeding the investment made for dividend income, disallowance under Section 14A read with Rule 8D is not permissible. This decision, concerning the same assessee for AY 2004-05 and subsequently followed for other years, had attained finality. Therefore, the Tribunal did not err in deleting the disallowance. For the second issue, the Court referenced paragraph 17 of its earlier judgment, which dealt with the disallowance of loss on the sale of fertilizer bonds. The Tribunal had treated the loss as a business loss, relying on the Apex Court's decision in Patnaik and Co. Ltd., where a loss on disposal of a government loan, taken for preferential treatment in vehicle orders, was held to be a revenue loss as it did not bring an asset of a capital nature and there was no enduring advantage. The High Court found no reason to deviate from this finding. Consequently, the appeal was dismissed.

The High Court held that the substantial questions of law raised in the appeal were no longer res integra, referring to its own prior decision in Principal Commissioner of Income Tax 2, Vadodara vs. Gujarat Cop. Op. Milk Marketing Fedaration Ltd. [Tax Appeal No.1266 of 2018], decided on October 22, 2018. In that prior decision, the Court noted that while the lower authorities had not thoroughly examined the capital vs. revenue nature of the expenditure, the activities undertaken under the fertility improvement program by the assessee (GCMMF) were general in nature and aimed at improving practices for better fertility among milk animals by addressing issues causing infertility. These activities included village awareness camps, animal registration, fertility camps, mass deworming, mineral mixture distribution, mass vaccination, and providing balanced cattle feed. The Court concluded that these expenditures were for the purpose of its business and not co-relatable to any tangible returns. The High Court further noted that the SLP filed by the Revenue against its earlier judgment was dismissed by the Supreme Court on April 26, 2019. Consequently, the present appeal was dismissed.

The High Court allowed the Letters Patent Appeal, quashing and setting aside the learned Single Judge's oral order dated September 27, 2018, and the State authorities' order dated September 15, 2018, which cancelled the appellant's appointment. The Court found that the appellant's circumstances, including his wife's serious ailment and his role as the sole caretaker, were genuine and pressing. The Court reasoned that the State could have exercised more compassion and extended the reporting tenure, especially considering the post had remained vacant and the appellant's inability to join due to distance and the need for post-operative care for his wife. The Court emphasized that the writ jurisdiction under Article 226 is meant to achieve substantial justice and mould reliefs to suit peculiar circumstances. The ratio decidendi is that in cases of genuine and pressing domestic circumstances, the writ court should exercise its discretionary power under Article 226 with compassion, even if it means granting a last opportunity to join duty, rather than cancelling an appointment, particularly when the candidate faces ineligibility due to being overage. The respondents were directed to issue a fresh appointment order within one week, and the appellant was directed to join within one week of receiving it.

The High Court held that the pendency of the Special Leave Petition (SLP) before the Supreme Court does not, by itself, warrant admitting the present appeal. The Court noted that the quantum additions had been deleted by the High Court itself in the case of CIT vs. G.I.D.C. (83 taxmann.com 366). Consequently, the penalty, being consequential to these additions, would not survive. The Court found no error in the Tribunal's order in canceling the penalty and therefore rejected the grounds of appeal raised by the Revenue. The reasoning was that the foundation for the penalty (the quantum additions) had been removed by a binding decision of the High Court. The penalty quantification mechanism under Section 271(1)(c)(iii) is dependent on the additions made to the assessee's income, and with the additions eliminated, the penalty cannot be sustained. The order of the CIT(A) in cancelling the penalty was confirmed.

The High Court disposed of the appeal as not pressed. The Court noted that the tax effect in the present case was less than Rs. 15 Lakhs. In view of CBDT Circular No. 21/2015, as clarified by Circular No. 3/2018, which provides revised monetary limits for filing departmental appeals, the revenue's counsel submitted that the appeal would not be pressed. The Court accepted this submission and accordingly disposed of the appeal. The specific findings on the substantial questions of law framed at the time of admission were not adjudicated on merits. The operative direction was that the appeal stands disposed of as not pressed.

The High Court held that the writ-application was not maintainable. The Court reasoned that Rule 11 of the Second Schedule to the Income Tax Act, 1961, provides a clear procedure for investigating claims or objections made against the attachment or sale of property. If the petitioner's claim is that the property is not liable for attachment, they must first make such a claim before the Tax Recovery Officer (TRO). The TRO is then mandated to investigate the claim. Approaching the High Court under Article 226 of the Constitution directly, without exhausting this statutory remedy, is premature. The Court cited the Supreme Court's decision in Isha Beevi and others v. Tax Recovery Officer, Quilon and others, which emphasized that while an alternative remedy is not always a bar to a writ of prohibition, a total absence of jurisdiction must be demonstrated. In this case, the TRO's action was based on a statutory provision, and the petitioner's grievance was about the applicability of that provision to the property, which falls within the scope of Rule 11. Therefore, the petitions were rejected as not maintainable, with a direction to the petitioner to file a claim before the TRO within four weeks.

The High Court held that the writ-application was not maintainable. The Court reasoned that Rule 11 of the Second Schedule to the Income Tax Act, 1961, provides a clear procedure for investigating claims or objections made against the attachment or sale of property. If the petitioner's claim is that the property is not liable for attachment, they must first make such a claim before the Tax Recovery Officer (TRO). The TRO is then mandated to investigate the claim. Approaching the High Court under Article 226 of the Constitution directly, without exhausting this statutory remedy, is premature. The Court cited the Supreme Court's decision in Isha Beevi and others v. Tax Recovery Officer, Quilon and others, which emphasized that while an alternative remedy is not always a bar to a writ of prohibition, a total absence of jurisdiction must be demonstrated. In this case, the TRO's action was based on a statutory provision, and the petitioner's grievance was about the applicability of that provision to the property, which falls within the scope of Rule 11. Therefore, the petitions were rejected as not maintainable, with a direction to the petitioner to file a claim before the TRO within four weeks.

The High Court held that the Tribunal did not commit any error, let alone an error of law, in passing the impugned order. The Tribunal had correctly cancelled the order passed under Section 263 by the Commissioner of Income Tax. The Tribunal's reasoning was that the Assessing Officer (AO) had indeed made an enquiry regarding the depreciation claim on the motorcar, and the assessee had provided satisfactory evidence. The Tribunal relied on various judicial pronouncements, including decisions of the ITAT Mumbai in Blue Steel Engineers Pvt. Ltd. and Shah Rukh Khan, and the ITAT Pune Bench in Gera Developments Pvt. Ltd. vs. JCIT, which supported the assessee's claim for 50% depreciation on a light motor vehicle. The Tribunal found that the Commissioner's action under Section 263 was based on incorrect and baseless allegations of a lack of enquiry and that the Commissioner could not substitute his own view for that of the AO when the AO had taken a plausible view. The High Court agreed with the Tribunal's conclusion that the Commissioner did not assume valid jurisdiction to revise the assessment order. The issue was also found to be covered by the High Court's own decision in CIT vs. Arvind Jewellers. Consequently, the appeal filed by the Revenue was dismissed.

The High Court held that the writ petition was not maintainable. While acknowledging the petitioner's grievance that the property was not liable for attachment, the Court found that Rule 11 of the Second Schedule to the Income Tax Act, 1961, provides a specific remedy for such claims. This rule mandates the Tax Recovery Officer to investigate any claim or objection made against the attachment or sale of property on the ground that it is not liable. The Court referred to the Supreme Court's decision in Isha Beevi and others v. Tax Recovery Officer, Quilon and others, which emphasized that preliminary notices of recovery proceedings could only be quashed if entirely without jurisdiction, and that the existence of an alternative remedy under Rule 11 is generally not a bar to a writ, but the applicant must demonstrate a total absence of jurisdiction. In this case, the TRO had the power to proceed under another provision, even if a wrong section was cited. Therefore, the petitioner was directed to file a claim before the TRO under Rule 11(1) within four weeks, and the TRO was directed to investigate the claim in accordance with law. The writ applications were rejected as not maintainable.

The High Court held that the ITAT and CIT(A) were correct in allowing the deduction under Section 80IB(10) to the assessee. The Court found no merit in the Revenue's submission that the entire "Park City" project should be treated as one composite project simply because it was situated on the same parcel of land. The Court reasoned that it is not open for the Revenue to combine separate housing projects to deny statutory relief. The assessee had segregated the projects, not mixing them in design, structure, or amenities, and had not claimed relief for the ineligible row house project. Combining the two projects would lead to an unjust and absurd result, defeating the legislative intent of encouraging low-cost housing projects. The Court noted that the projects had different commencement certificates, started at different times, were separate in space and statutory approvals, and maintained separate books of account. The Court relied on the Bombay High Court's decision in *CIT vs. Vandana Properties* and the Madras High Court's decision in *CIT vs. Voora Property Develop P. Ltd.*, which emphasized that the object of Section 80IB(10) is to boost housing stock, and a narrow interpretation by the Revenue that defeats this object should be avoided. The Court found no good reason to disturb the Tribunal's order.

The High Court allowed the appeal of the Revenue. The Court referred to a coordinate bench's decision in M/s Checkmate Facility and Electronic Solutions Pvt Ltd vs. Deputy Commissioner of Income Tax, which dealt with a similar issue. The Court analyzed Section 38(1) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and Section 36(1)(va) of the Income Tax Act, 1961. The Court held that the employer is required to deposit the employee's contribution within fifteen days of the close of every month in which the wages are paid and the corresponding liability to deduct arises. The Court found that the assessee's contention that the due date gets deferred by another month if wages are paid in the following month was incorrect. Therefore, the disallowance made by the Assessing Officer was upheld, and the ITAT's order was quashed and set aside. The substantial question of law was answered in favour of the Revenue.

The High Court allowed the Tax Appeals filed by the Revenue, quashing and setting aside the impugned order of the ITAT. The Court answered the substantial question of law in favor of the Revenue. The reasoning was based on the interpretation of Section 36(1)(va) of the Income Tax Act, 1961, and Section 38 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The Court held that the employer is required to deduct the employee's contribution before paying wages and must deposit it within fifteen days of the close of every month. The phrase 'within fifteen days of the close of every month' was interpreted to mean in relation to the month for which wages are to be paid and the corresponding liability to deduct and deposit arises. Therefore, the contention that the due date gets deferred to the following month if wages are paid in the subsequent month was rejected. The ratio decidendi is that the due date for depositing employee's contribution to PF/ESI is linked to the month to which the salary pertains, not the date of salary disbursement.

The High Court held that the ITAT and the CIT(Appeals) were correct in allowing the deduction under Section 80IB(10) to the assessee. The Court found no reason to disturb the concurrent findings of the lower appellate authorities. The Revenue's argument that the entire project should be treated as one composite unit simply because it was on the same parcel of land was rejected. The Court reasoned that it is not open for the Revenue to combine separate projects to deny statutory relief. The assessee had segregated the projects, maintained separate accounts, and had not claimed deduction for the ineligible portion (row houses). Combining the two projects would lead to an unjust and absurd result, defeating the legislative intent of encouraging housing projects. The Court referred to the Bombay High Court's decision in *CIT vs. Vandana Properties* and the Madras High Court's decision in *CIT vs. Voora Property Develop P. Ltd.*, which emphasized the object of Section 80IB(10) and held that separate approvals or development plans do not disqualify a project if the conditions are met for the eligible part. The Court concluded that the Revenue was not right in treating both projects as one integrated unit without supporting facts. Therefore, the appeal was dismissed.

The Court held that the petitioner's claim for a separate speaking order on his objections before the final order is not supported by any provision of law under the Benami Act. The Court found that Section 24 of the Benami Act and subsequent provisions do not contain any mechanism for dealing separately with preliminary objections and passing an order before the final order. Regarding the reliance on the GKN Driveshafts judgment, the Court distinguished the present case, stating that the sphere and operation of Section 24 of the Benami Act are completely different from Section 147 of the Income Tax Act. Section 24 deals with concluding whether a property is benami, while Section 147 deals with assessing or reassessing income. The Court also noted that the petitioner's reply to the show cause notice did not contain any preliminary objections that required a separate decision; objections regarding non-supply of documents were considered merits that should be dealt with in the final order. The Court viewed the subsequent request for a speaking order as an afterthought.

The High Court held that the issue was squarely covered by its previous decision in the case of Mahendra C. Shah. The ITAT had dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of the penalty. The CIT(A) had found that the assessee had fulfilled all three conditions stipulated under Section 271AAA(2): (i) admitting the undisclosed income and specifying the manner in which it was derived in a statement under Section 132(4), (ii) substantiating the manner of derivation, and (iii) paying the tax along with interest. The ITAT, in turn, relied on the CIT(A)'s findings and further noted that the Assessing Officer did not raise queries regarding the manner of earning or substantiation during the Section 132(4) statement recording. The High Court found no infirmity in the ITAT's order and dismissed the appeal. The operative direction was the dismissal of the Revenue's appeal.

The High Court held that the petition did not deserve to be entertained. Regarding the alleged agreement to sell, the Court noted that its validity was yet to be examined by the Civil Court. The Court also raised a preliminary concern about the Rs. 2,40,00,000/- cash payment, questioning whether it had been accounted for with the Income Tax Department and noting the absence of any other evidence of legal transfer of consideration. Consequently, the Court directed that any summons to the petitioners by the police must be in writing, sent via message or email, or to their mobile number. It also directed that any complaint made by respondent No. 5 (presumably the complainant) should be registered as an FIR if a cognizable offense is made out, within one week. The matter was also referred to the Income Tax Department for examination of the Rs. 2.40 crores cash transaction. The petition was disposed of with these observations and directions.

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing an order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during the period from 2.2.2018 until four weeks after 4.2.2019, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored to its file pursuant to the court's order. Therefore, this period could not be taken into consideration for computing the eighteen-month period mandated by section 245D(4A). The operative direction was that the petitions succeed and are allowed, with the exclusion of the specified period. The Settlement Commission was advised to decide the applications expeditiously. No issue was expressly left undecided.

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing an order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during the period from 2.2.2018 until four weeks after 4.2.2019, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored to its file pursuant to the court's order. Therefore, this period could not be taken into consideration for computing the eighteen-month period mandated by section 245D(4A). The operative direction was that the petitions succeed and are allowed, with the exclusion of the specified period. The Settlement Commission was advised to decide the applications expeditiously. No issue was expressly left undecided.

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing an order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during the period from 2.2.2018 until four weeks after 4.2.2019, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored to its file pursuant to the court's order. Therefore, this period could not be taken into consideration for computing the eighteen-month period mandated by section 245D(4A). The operative direction was that the petitions succeed and are allowed, with the exclusion of the specified period. The Settlement Commission was advised to decide the applications expeditiously. No issue was expressly left undecided.

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing an order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during the period from 2.2.2018 until four weeks after 4.2.2019, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored to its file pursuant to the court's order. Therefore, this period could not be taken into consideration for computing the eighteen-month period mandated by section 245D(4A). The operative direction was that the petitions succeed and are allowed, with the exclusion of the specified period. The Settlement Commission was advised to decide the applications expeditiously. No issue was expressly left undecided.

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing an order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during the period from 2.2.2018 until four weeks after 4.2.2019, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored to its file pursuant to the court's order. Therefore, this period could not be taken into consideration for computing the eighteen-month period mandated by section 245D(4A). The operative direction was that the petitions succeed and are allowed, with the exclusion of the specified period. The Settlement Commission was advised to decide the applications expeditiously. No issue was expressly left undecided.

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing the order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during this period, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored pursuant to the court's order. Therefore, this period could not be taken into consideration for the statutory eighteen-month computation. The Settlement Commission was directed to decide the applications expeditiously and not wait for the entire eighteen-month period to expire. The ratio is that periods where proceedings are stayed or applications are not pending before the Settlement Commission due to judicial intervention should be excluded from the statutory time limit for passing orders.

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing an order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during the period from 2.2.2018 until four weeks after 4.2.2019, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored to its file pursuant to the court's order. Therefore, this period could not be taken into consideration for computing the eighteen-month period mandated by section 245D(4A). The operative direction was that the petitions succeed and are allowed, with the exclusion of the specified period. The Settlement Commission was advised to decide the applications expeditiously. No issue was expressly left undecided.

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing an order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during the period from 2.2.2018 until four weeks after 4.2.2019, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored to its file pursuant to the court's order. Therefore, this period could not be taken into consideration for computing the eighteen-month period mandated by section 245D(4A). The operative direction was that the petitions succeed and are allowed, with the exclusion of the specified period. The Settlement Commission was advised to decide the applications expeditiously. No issue was expressly left undecided.

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing an order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during the period from 2.2.2018 until four weeks after 4.2.2019, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored to its file pursuant to the court's order. Therefore, this period could not be taken into consideration for computing the eighteen-month period mandated by section 245D(4A). The operative direction was that the petitions succeed and are allowed, with the exclusion of the specified period. The Settlement Commission was advised to decide the applications expeditiously. No issue was expressly left undecided.

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing an order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during the period from 2.2.2018 until four weeks after 4.2.2019, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored to its file pursuant to the court's order. Therefore, this period could not be taken into consideration for computing the eighteen-month period mandated by section 245D(4A). The operative direction was that the petitions succeed and are allowed, with the exclusion of the specified period. The Settlement Commission was advised to decide the applications expeditiously. No issue was expressly left undecided.

The High Court held that while the reasons recorded for reopening the assessment, when considered with the appraisal report and affidavit-in-reply, might suggest sufficient material for the Assessing Officer to form a belief that income chargeable to tax had escaped assessment, the Assessing Officer had no jurisdiction to reopen the assessment for Assessment Year 2011-12. This was because an order of the Settlement Commission under Section 245D(4) had already been passed in relation to that assessment year. Therefore, the impugned notice under Section 148 of the Act could not be sustained. The Court quashed and set aside the notice. However, it was open for the Revenue to approach the Settlement Commission for appropriate relief, such as a declaration that the previous order under Section 245D(4) was void, by setting out the relevant facts and circumstances. Any such application by the Revenue would be decided on its merits. The principle established is that an assessment settled by the Settlement Commission cannot be reopened by the Assessing Officer, irrespective of the sufficiency of the reasons for reopening.

The Tribunal held that while reasons recorded for reopening cannot be supplemented with new grounds or materials, they can be explained or elaborated upon in an affidavit-in-reply. The reasons recorded need not be overly elaborate but must reflect the Assessing Officer's application of mind to the available evidence, demonstrating a belief that income chargeable to tax has escaped assessment. In this case, the appraisal report, referenced in the reasons, was detailed and provided a clear picture of the modus operandi for providing accommodation entries. The Tribunal found sufficient material in the appraisal report for the Assessing Officer to form the belief that income chargeable to tax had escaped assessment, and this material specifically referred to the petitioner, establishing a link. Therefore, no infirmity was found in the notice issued under section 148. The petition was dismissed.

The Tribunal held that the Registering Authority does have the power to correct errors in the date of birth on a Birth Certificate. The Court referred to Section 15 of the Registration of Births and Death Act, 1969, and Rule 11 of the Gujarat Registration of Birth and Death Rules, 2004. Citing previous judgments of the High Court in similar circumstances, including Madhavi Sandip Patel v. Registrar – Birth and Death Department, Nitaben Nareshbhai Patel v. State of Gujarat, and an unreported judgment in Sachin Natwarlal Patel v. Registrar of Births and Deaths cum Talati cum Mantri, the Court concluded that the Registering Authority is empowered to make the requested correction. Consequently, the Court directed the respondent No.1 (Registrar of Births and Deaths) to re-consider the petitioner's application for rectification of his date of birth within one month of receiving the Court's order, after providing the petitioner an opportunity of being heard. The petition was disposed of with this direction.

The High Court modified the Tribunal's award. Regarding the income assessment, the Court found the Tribunal's assessment of Rs. 7,000/- per month to be excessive considering the lack of documentary proof. The prospective income considered at Rs. 14,000/- was also deemed erroneous. The Court recalculated the income by deducting 10% for income tax from the Rs. 7,000/- assessed income, resulting in Rs. 6,300/-. Applying a 10% rise as per National Insurance Company Ltd. v. Pranay Sethi and Others, the net income became Rs. 6,930/-, rounded off to Rs. 7,000/-. Deducting 1/4th for the deceased's expenses (Rs. 1,750/-), the monthly dependency was Rs. 5,250/-. With an 11 multiplier, the yearly dependency amounted to Rs. 63,000/-, leading to a total compensation of Rs. 6,93,000/-. The conventional heads were increased from Rs. 23,000/- to Rs. 70,000/-. Thus, the total compensation was fixed at Rs. 7,63,000/-. The appellant insurance company was entitled to a refund of the differential amount of Rs. 4,15,000/-.

The High Court held that the impugned notice dated March 28, 2018, issued under Section 148 of the Income Tax Act, 1961, is quashed and set aside. The Court found that the Assessing Officer had all the necessary information regarding the bad debts, including the fact that an application for RBI permission was pending, during the original assessment proceedings. The Assessing Officer had accepted the assessee's claim at that time, implicitly agreeing that debts could be written off pending final approval. Therefore, the reopening was based on a mere change of opinion on the same set of facts already considered, which is not a valid ground for reassessment under Section 147. The Court relied on the Apex Court's decision in CIT v. Kelvinator of India Ltd., emphasizing that reassessment powers cannot be exercised on the basis of a 'mere change of opinion' without tangible material indicating escapement of income. The Court concluded that the respondent could not have formed a belief that income was under-assessed, as the reassessment proceedings were initiated by reviewing the same subject matter of the original assessment.

The High Court held that the impugned notice issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for AY 2011-2012, is liable to be quashed and set aside. The Court found that the Assessing Officer had already considered the salary expenditure during the original assessment proceedings by issuing notices under Section 142(1) and examining the details provided by the assessee. The reasons for reopening, which stemmed from a survey conducted more than two years after the original assessment, were based on an alleged discrepancy in salary payments. However, the Court noted that the Assessing Officer had previously sought and received explanations regarding salary payments, including those to related parties, and had passed an assessment order. Therefore, the reopening was based on a mere change of opinion, which is not permissible in law. The Court also observed that the Assessing Officer's order rejecting the assessee's objections was perfunctory and did not properly consider the assessee's submissions. The Court concluded that there was no escapement of income and the assessee had made a full and true disclosure of material facts during the original assessment.

The High Court held that the impugned notice issued under Section 148 of the Income Tax Act, 1961, was without jurisdiction and liable to be quashed and set aside. The Court found that the Assessing Officer had failed to apply his mind to the objections filed by the petitioner. The reasons recorded for reopening were based on incorrect facts, particularly by considering only the salary register of the Navsari unit and ignoring the reconciliation provided by the petitioner regarding the Bardoli unit. The Court noted that the salary expenditure was scrutinized during the original assessment, and the reopening was based on a mere change of opinion, which is not permissible. The Assessing Officer's rejection of objections was considered an 'eyewash' as the justification and reconciliation provided by the petitioner were not even referred to. The Court emphasized that the procedure for filing objections is not an empty formality but an opportunity for the assessee to explain that there is no escapement of income. Therefore, the petition was allowed, and the notice was quashed.

The High Court held that the orders passed by the AO and PCIT rejecting the stay applications were not passed with due application of mind. The AO merely referred to the CBDT circular and directed payment of 20% of the demand without considering the merits. The PCIT rejected the application on grounds that the pleas were not covered by CBDT guidelines and the assessee could raise funds, brushing aside other submissions. The court found that the PCIT did not apply his mind to the contention that the assessment was unreasonably high-pitched and would cause genuine hardship. While the court found merit in the submissions regarding the additions and noted the assessment appeared unreasonably high-pitched, it did not find a case for unconditional stay. The court also noted the petitioner's admission of Rs. 91,50,156/- as out of books sales. Considering the high-pitched assessment, the court decided to grant a partial stay. The impugned orders and the notice under Section 226(3) were quashed and set aside. Further recovery of the demand was stayed subject to the petitioner making payment of 10% of the demand of Rs. 8,57,91,420/-. The court clarified that its view was prima facie for deciding the stay application and the CIT (Appeals) would decide the appeal independently.

The High Court noted that the impugned order by the Joint Secretary (Appeals) recorded that the petitioner had not taken training for operating weapons nor produced an NCC certificate. It also mentioned the petitioner's low income based on income tax returns, but acknowledged that the issue of his Rifle Club membership was not considered. At this juncture, the petitioner expressed his willingness to approach the licensing authority again with necessary particulars to substantiate his claim of being an active member of a 'Rifle Club' for sports. The Court held that it is open for the petitioner to approach the licence issuing authority with a fresh set of evidence. The licencing authority shall reconsider the petitioner's case on its own merits after granting an opportunity of hearing within three months of the fresh application. The impugned orders will not impede the fresh consideration. The petition is partly allowed.

The High Court held that the Assessing Officer (AO) had validly assumed jurisdiction under Section 147 of the Income Tax Act, 1961, to reopen the assessment. The court found that the reopening was sought beyond four years from the end of the relevant assessment year. Crucially, the court determined that the petitioner had disclosed all material facts necessary for its assessment during the original scrutiny. The AO had examined the claim for deduction under Section 80IB(10) in detail, calling for various information and accepting the claim. The fact that the AO did not examine the claim from the specific angle of clauses (e) and (f) of Section 80IB(10) (regarding allotment of multiple units to one individual or their family) did not constitute a failure on the part of the assessee to disclose material facts. Instead, it amounted to a mere change of opinion by the AO. The court relied on its decision in Cliantha Research Ltd. v. Deputy Commissioner of Income-tax, [2014] 225 Taxman 102 (Gujarat), which held that a reassessment based on a change of opinion, even within four years, is not permissible if all facts were disclosed. Therefore, the assumption of jurisdiction by the AO under Section 147 was invalid, rendering the impugned notice unsustainable. The petition was allowed, and the notice was quashed and set aside.

The High Court held that the Assessing Officer lacked valid grounds to reopen the assessment for AY 2011-12. The court reasoned that assessments for each year are independent. While the sale of flats to related parties in AY 2013-14 might disentitle the petitioner from claiming deduction under Section 80IB(10) for that year, it cannot be used to reopen the assessment of AY 2011-12, where the deduction was validly claimed based on the conditions prevailing at that time. The court found that no reasonable person could have formed the belief that income had escaped assessment for AY 2011-12 based on an event occurring in a subsequent year. Consequently, the impugned notice under Section 148 was quashed and set aside. The court noted that the first proviso to Section 147 was not attracted as there was no assessment under Section 143(3).

The High Court held that the appeal did not raise any substantial question of law. Regarding the expenses on stores and spares (issue a), the Court found that the concurrent findings of the CIT(Appeals) and the Tribunal, which considered the replacement of worn-out parts to restore efficiency without capacity addition, did not indicate perversity and thus did not give rise to a question of law. For the fertilizer bonds (issues b, c, and d), the Court noted that the ITAT had considered the nature of the bonds and the transactions. The Court's reasoning focused on the fact that the transactions between the assessee and dealers were on a principal-to-principal basis. The dealers made payments to the assessee, and accounts were maintained in favour of the dealers, making them debtors. Therefore, the assessee was not responsible for paying commission to the dealers. Consequently, the requirement to deduct tax under Section 194H did not arise, and the disallowance under Section 40(a)(ia) was not justified. The Court concluded that no legal error warranting interference was committed by the ITAT, and no substantial question of law arose. The appeal was dismissed.

The High Court held that the reasons cited by the Revisional Authority for rejecting the firearm license application were not sufficient. The Court noted that the initial rejection by the license issuing authority was on the ground of the petitioner's absence during a hearing, a reason not put forth by the petitioner. The Revisional Authority's grounds, such as the insufficiency of evidence of convictions and the nature of the petitioner's profession, were deemed inadequate for rejection. The Court directed the petitioner to make a fresh application to the license issuing authority, which should be considered on its merits and in accordance with the law, without prejudice from previous decisions. The petition was thus partly allowed.

The High Court held that the ITAT did not err in deleting the disallowance of legal and professional fees related to the buyback of shares. The Tribunal had correctly reasoned that these expenses were incurred for carrying out the buyback scheme, not for enhancing the capital structure, and were therefore revenue expenditure. Regarding membership fees, the ITAT's decision to allow them as customary expenses under Section 37 was upheld, relying on precedents like Gujarat State Export Corporation Ltd. v. CIT and CIT v. Samtel Color Ltd., which distinguish between capital and revenue expenditure based on the aim and object. For intangible assets and marketing rights, the Tribunal's finding that these were acquired under a Business Transfer Agreement for valuable consideration and were eligible for depreciation under Section 32(1)(ii) was affirmed. The court agreed with the assessee that the AO and CIT(A) were not justified in disallowing depreciation on these assets, which included marketing rights, right to carry on business, and technical know-how. The appeal was dismissed as no substantial question of law arose.

The High Court held that the Fee Regulatory Committee (FRC) must verify fee proposals by examining documentary evidence and conducting spot verifications, as mandated by Section 8(2)(b) and Rule 7(1)(c) of the Act and Rules. It found that the impugned orders often contained ad-hoc disallowances of expenditure without adequate reasoning or justification, violating the principles of natural justice and the specific provisions of the Act. The Court emphasized that the FRC cannot make uniform, subjective disallowances and must provide cogent reasons based on inquiry and evidence for any disallowance. The FRC should consider the schools' fundamental right under Article 19(1)(g) and avoid prescribing standardized fee structures, recognizing the unique educational methods of each school. The FRC must verify if any cash or kind is received in excess of determined fees or if associated trusts/companies profit from school activities, and assess whether proposed fees include more than a reasonable surplus for development and expansion. The Court quashed the impugned orders and remanded the matters back to the FRC for fresh determination, allowing schools to charge existing fees until a new decision is made within 12 weeks.

The High Court held that the Fee Regulatory Committee (FRC) must verify fee proposals by examining documentary evidence and conducting spot verifications, as mandated by Section 8(2)(b) and Rule 7(1)(c) of the Act and Rules. It found that the impugned orders often contained ad-hoc disallowances of expenditure without adequate reasoning or justification, violating the principles of natural justice and the specific provisions of the Act. The Court emphasized that the FRC cannot make uniform, subjective disallowances and must provide cogent reasons based on inquiry and evidence for any disallowance. The FRC should consider the schools' fundamental right under Article 19(1)(g) and avoid prescribing standardized fee structures, recognizing the unique educational methods of each school. The FRC must verify if any cash or kind is received in excess of determined fees or if associated trusts/companies profit from school activities, and assess whether proposed fees include more than a reasonable surplus for development and expansion. The Court quashed the impugned orders and remanded the matters back to the FRC for fresh determination, allowing schools to charge existing fees until a new decision is made within 12 weeks.

The High Court held that the Fee Regulatory Committee (FRC) must exercise its powers under Section 8 of the Gujarat Self Financed Schools (Regulation of Fees) Act, 2017, in its true perspective. The FRC is required to verify fee proposals by examining documentary evidence and conducting spot verification of documents and school buildings as per Rule 7(1)(c) of the Rules, 2017. The Court found that many impugned orders showed ad-hoc disallowances of expenditure without assigning reasons or providing justification, which is impermissible. The FRC must justify any disallowance with cogent reasons based on inquiry and evidence, avoiding uniform, ad-hoc disallowances based on subjective belief. The FRC should not substitute its judgment for that of the management but should verify if expenditures are for imparting education. The Court emphasized that fees should include only a reasonable surplus for development, expansion, and other activities, considering factors like asset replacement, inflation, and the school's unique educational methods. The FRC must verify if any cash or kind is received in excess of determined fees or if associated trusts/companies profit from school activities. The Court quashed and set aside the impugned orders and remanded the matters back to the FRC for fresh determination of fee proposals, directing the FRC to complete this process within 12 weeks and permitting schools to charge existing fees in the interim.

The High Court held that the Fee Regulatory Committee (FRC) must verify fee proposals by examining documentary evidence and conducting spot verifications, as mandated by Section 8(2)(b) and Rule 7(1)(c) of the Act and Rules. It found that the impugned orders often contained ad-hoc disallowances of expenditure without adequate reasoning or justification, violating the principles of natural justice and the specific provisions of the Act. The Court emphasized that the FRC cannot make uniform, subjective disallowances and must provide cogent reasons based on inquiry and evidence for any disallowance. The FRC should consider the schools' fundamental right under Article 19(1)(g) and avoid prescribing standardized fee structures, recognizing the unique educational methods of each school. The FRC must verify if any cash or kind is received in excess of determined fees or if associated trusts/companies profit from school activities, and assess whether proposed fees include more than a reasonable surplus for development and expansion. The Court quashed the impugned orders and remanded the matters back to the FRC for fresh determination, allowing schools to charge existing fees until a new decision is made within 12 weeks.