Rajasthan High Court Judgments — 2018

The Tribunal held that when the main assessment order itself has ceased to exist, the assessee cannot be saddled with a penalty that is consequential to that assessment. The High Court allowed the appeal, setting aside the impugned ITAT order dated 26.06.2009 upholding the penalty. The reasoning was that the primary assessment order had been nullified, rendering the penalty unsustainable. The ratio decidendi is that a penalty cannot exist independently of the assessment order it is predicated upon. The operative direction was to set aside the ITAT's order on penalty. The appellant's counsel stated he would withdraw the writ petition filed against the rectification order rejection.

The High Court dismissed the appeal. The decision was based on the submission made by the appellant (Revenue) that the appeal might not be maintainable in light of Circular No. 3/2018 issued by the Central Board of Direct Taxes. This circular likely sets a monetary threshold for the tax effect of an appeal for it to be pursued by the Revenue. Since the counsel for the appellant conceded that the appeal might not be maintainable due to the tax effect being less than the prescribed limit (Rs. 50,00,000/-), the Court accepted this submission. The operative direction was to dismiss the appeal.

The High Court allowed the appeals on the second substantial question of law concerning judicial discipline. The Court noted that the ITAT had passed two contradictory orders on the same date (30.06.2017) in identical matters. One order (ITA Nos. 84 & 85/JP/2017, the impugned order) held that TDS was deductible under Section 194J for technical services, including managerial services and supply of personnel. The other order (ITA Nos. 471 & 472/JP/2016) held that Section 194J was not applicable and tax was rightly deducted under Section 194C for contracts involving supply of hardware, software, and personnel to implement the project, citing the case of PCIT Vs. Senior Manager (Finance), Bharat Heavy Electricals Limited. The Court found the revenue's counsel unable to clarify the procedural history regarding the earlier contradictory order. Consequently, the High Court set aside the impugned order of the ITAT and remanded the matter back to the ITAT for a fresh decision. The parties were given the liberty to apprise the ITAT of the relevant aspects. The Court did not decide the applicability of Section 194C versus 194J on merits.

The High Court allowed the appeals on the second substantial question of law, setting aside the impugned order of the ITAT and remanding the matter to the ITAT for a fresh decision. The Court noted that the appeals were admitted on two substantial questions of law: the applicability of Section 194C versus Section 194J, and the violation of judicial discipline due to the ITAT passing conflicting orders on the same date in identical matters. The Court observed that the revenue's counsel could not definitively state whether an appeal was filed against the contrary ITAT judgment. Similarly, the appellant's counsel could not clarify how supplies to other districts were treated. Given these circumstances, particularly the violation of judicial discipline, the Court found it appropriate to remand the matter. The ITAT was directed to decide the appeals afresh, and parties were permitted to apprise the ITAT of the relevant aspects. The Court did not decide the merits of the applicability of Section 194C or 194J.

The High Court held that the Settlement Commission's order was not illegal. The court found that the petitioner-company did not satisfy the conditions laid out in Explanation (a)(v) or (a)(vi)(B) to Section 245C(1) of the Income Tax Act, 1961. Regarding Explanation (a)(v), the court noted that the definition of 'related person' is restrictive, and merely having directors of a specified person as directors in the petitioner company does not automatically make the petitioner a 'related person' if they do not individually hold substantial interest (more than 20% shares) in the petitioner company. The court rejected the argument of indirect substantial interest through another entity, emphasizing that the definition uses the word 'means', indicating a strict interpretation. For Explanation (a)(vi)(B), the court found that the collective stake of directors or their relatives was not to be considered for determining substantial interest, as the legislature had not provided for clubbing of shareholding of different persons. The court also dismissed the petitioner's reliance on the Karnataka High Court judgment in CIT vs. Khoobchand M. Makhija, finding it inapplicable to the present case. Therefore, the writ petition was dismissed.

The High Court dismissed the appeal preferred by the Revenue. The court noted that the issue involved in the present appeal was identical to the issue decided in D.B. Income Tax Appeal No. 170/18, "CIT (Exemption) Jaipur vs. Anaesthesia Society", decided on December 4, 2018. In that earlier case, the High Court had relied on the Supreme Court's decision in 'Ahmedabad Rana Caste Association vs. CIT' and its own previous decision in 'CIT vs. Jodhpur Chartered Accountants Society' to dismiss the Revenue's appeal. Therefore, for parity of reasons, the present appeal filed by the Revenue was also dismissed. The operative direction was the dismissal of the Revenue's appeal.

The Tribunal held that the assessee society is eligible for registration under Section 12A of the Income Tax Act, 1961. The reasoning was that although the society primarily caters to anaesthetists, it is not for the benefit of specified individuals but rather a section of the public (doctors practising anaesthesia in the specified districts). The Tribunal relied on the Supreme Court's decision in 'Ahmedabad Rana Caste Association vs. CIT', which established that an object beneficial to a section of the public is an object of general public utility, provided the beneficiaries are identifiable by some common quality of a public or impersonal nature. The Tribunal also cited the Rajasthan High Court's decision in 'CIT vs. Jodhpur Chartered Accountants Society', which held that disseminating knowledge and education for the benefit of the general public, even if through a specific section, falls under general public utility. The Tribunal concluded that the activities of the assessee society, such as promoting medical science, research, and organizing seminars, would ultimately benefit the public at large, thus falling within the purview of general public utility. The appeal was dismissed as no substantial question of law arose.

The High Court held that the ITAT was justified in allowing the approval under Section 80G(5). The Court reasoned that an assessee cannot be expected to spend more than its income, nor to extend its activities beyond its financial means. The donation of Rs. 41,000/- made by the trust over three years was considered sufficient in light of its income. The Court found it erroneous for the Commissioner to infer that the trust had failed to carry out its objects. The judgment emphasized that an application for approval under Section 80G(5)(vi) can only be rejected if the trust fails to carry out its objects or violates conditions (i) to (v) of Section 80G(5). Neither the Commissioner nor the Revenue pointed to any such breach. The Court found no error in the ITAT's judgment and no substantial question of law involved. The appeal was dismissed.

The Rajasthan High Court, Jaipur Bench, did not render a fresh decision on the merits of the appeal. Instead, the learned counsel for both parties agreed that the substantial questions of law on which the appeal was admitted had already been answered by a coordinate bench of the same court. This prior decision was rendered on May 16, 2017, in a batch of appeals, including D.B. Income Tax Appeal No.626/2008 – C.I.T. Alwar Vs. M/s. Gillate India Limited, which also dismissed those appeals. Consequently, the present appeal was dismissed in view of the aforesaid precedent. The specific findings and reasoning of the prior judgment, which would form the ratio decidendi for this dismissal, are not detailed in the provided text, other than that it dismissed a bunch of appeals on similar questions.

The High Court dismissed the appeal. The reasoning was based on the submission made by the learned counsel for the appellant (revenue) that the tax effect of the appeal was Rs. 31,50,205, which is below the threshold of Rs. 50,00,000 stipulated in Circular No. 3/2018 issued by the Central Board of Direct Taxes. Therefore, the appeal was considered not maintainable in light of the aforesaid instruction. The appellant was granted liberty to apply for revival of the appeal if its case falls within the conditions stipulated in Clause 10 of the circular. The ratio decidendi is that appeals with a tax effect below the prescribed monetary limit in CBDT circulars are not maintainable. No specific issue was left undecided.

The High Court dismissed the present appeal. The reasoning was based on the fact that a similar appeal, D.B. Income Tax Appeal No.100/17, which arose from the same common order dated 10.07.2017 passed by the ITAT in ITA No.198/Jodh/2017, had already been dismissed by the High Court vide its order dated 06.02.2018. The Court found no reason to deviate from its prior decision and therefore, dismissed the present appeal in light of the said order. No specific issues regarding the merits of the ITAT's order were decided in this High Court judgment. The operative direction was the dismissal of the appeal.

The High Court held that while additions cannot be made solely on surmises and conjectures without material, in the present case, the Tribunal's findings were not based on such grounds and there was material to support them. The Tribunal had considered the valuation report of the DVO and a sale instance of a nearby property. Adjusting for time period, cost inflation, size, and other peculiar facts, the Tribunal estimated the fair market value at around Rs. 13,500/- per sq. yard. This led to a substantial reduction in the addition. The Court found no quarrel with the proposition that evidence is required, but in this specific factual matrix, the Tribunal's conclusion was supported by material. Therefore, the substantial questions of law were answered in favour of the Revenue and against the assessees. The appeals were dismissed.

The High Court held that while additions cannot be made solely on surmises and conjectures without material, in the present facts, the Tribunal's findings were not based on such grounds, and there was material to support them. The Assessing Officer initially made an addition of Rs. 6,20,60,000/-. The CIT(A) reduced it to Rs. 75,36,325/-. The Tribunal, considering the DVO's valuation and a comparable sale instance of a nearby property (sold about a year later for Rs. 15,185/- per sq. yards), adjusted for time, inflation, size, and other peculiar facts, estimated the FMV at around Rs. 13,500/- per sq. yards, substantially reducing the addition to Rs. 22,83,000/-. The Court found no quarrel with the proposition that additions require material, but in this case, the Tribunal's findings were supported by material. Therefore, the substantial questions of law were answered in favour of the Revenue.

The High Court held that the appeals filed by the Revenue were dismissed. The Court found that both the Commissioner (Appeals) and the ITAT had concurrently held that the assessee had discharged its burden of proof under Section 68 of the Income Tax Act. The appellate authorities had thoroughly examined the material on record and concluded that the assessee had provided not only particulars and details of the applicants but also their Permanent Account Numbers (PANs), details of payment, and mode of payment. It was also noted that many investors had appeared before the AO and admitted their investments, and all investors had provided written confirmations, which remained uncontroverted by the Department. The Court reasoned that merely because some investors did not appear before the AO at the assessee's request, the addition was uncalled for and unjustified. The assessee had discharged its burden sufficiently. If the AO had doubts, he ought to have issued notices to the concerned applicants. The Court found no perversity in the findings of fact recorded by the appellate authorities and held that there was no substantial question of law requiring adjudication under Section 260A. The judgment in ITA No. 129/2017 was followed for ITA No. 135/2017, which involved the assessment year 2009-10 and a disputed amount of Rs. 1,08,08,000/-.

The High Court held that the appeals filed by the Revenue were dismissed. The Court found that both the Commissioner (Appeals) and the ITAT had concurrently held that the assessee had discharged its burden of proof under Section 68 of the Income Tax Act. The appellate authorities had thoroughly examined the material on record and concluded that the assessee had provided not only particulars and details of the applicants but also their Permanent Account Numbers (PANs), details of payment, and mode of payment. It was also noted that many investors had appeared before the AO and admitted their investments, and all investors had provided written confirmations, which remained uncontroverted by the Department. The Court reasoned that merely because some investors did not appear before the AO at the assessee's request, the addition was uncalled for and unjustified. The assessee had discharged its burden sufficiently. If the AO had doubts, he ought to have issued notices to the concerned applicants. The Court found no perversity in the findings of fact recorded by the appellate authorities and held that there was no substantial question of law requiring adjudication under Section 260A. The judgment in ITA No. 129/2017 was followed for ITA No. 135/2017, which involved the assessment year 2009-10 and a disputed amount of Rs. 1,08,08,000/-.

The High Court granted the appellant's request for permission to withdraw the appeals. The reasoning was based on Circular No. 3/18 dated 11.7.18, which indicated that the tax effect involved in the present appeals was below the threshold of Rs. 50 lacs, making them eligible for withdrawal under the said circular. Consequently, the High Court dismissed the appeals as withdrawn. No substantive issues of income tax law were decided, and therefore, no ratio decidendi for future cases was established on the merits of the tax dispute. The operative direction was to dismiss the appeals.

The Tribunal granted the appellant's permission to withdraw the appeals. The reasoning for this decision was solely based on the appellant's submission regarding the tax effect being below the threshold stipulated in Circular No. 3/18. The Tribunal noted that the tax effect involved in the present appeals was less than Rs. 50 lacs, which prompted the appellant's counsel to seek withdrawal. Consequently, the appeals were dismissed as withdrawn. No substantive issues of income tax law were decided, and therefore, no ratio decidendi for future cases was established. The operative direction was to dismiss the appeals as withdrawn.

The High Court, while acknowledging the technicality that the appellant might have been required to file a writ petition, chose not to dismiss the appeal on this ground. The Court considered that the appellant should not be left without a remedy, especially given the appellant's submission that a concession attributed to the Departmental Representative was not made, leading to a factual error in the Tribunal's original order. This Court had previously noted that the appellant's remedy was to approach the Tribunal for rectification. Therefore, the High Court condoned the delay in filing the rectification application, set aside the ITAT's order dated 27.12.2017, and restored the rectification application to the Tribunal for decision on merits.

The High Court held that the present appeal is liable to be dismissed. The reasoning was that the ITAT had dismissed the Revenue's appeal for Assessment Year 2012-13 by relying on the High Court's own previous judgments concerning Assessment Years 2007-08 to 2010-11, wherein identical questions of law were decided against the Revenue. The Revenue's counsel conceded that Special Leave Petitions against those earlier High Court judgments had been dismissed. Therefore, following the principle of consistency and the dismissal of SLPs against prior binding precedents, the present appeal was dismissed. The operative direction was the dismissal of the appeal. No issues were left undecided.

The High Court held that the appeal filed by the Revenue is liable to be dismissed. This decision was based on the fact that the Special Leave Petitions filed against the earlier judgments of the High Court, which had dismissed the Revenue's appeals for Assessment Years 2007-08 to 2010-11 on identical questions of law, had already been dismissed. The Revenue's counsel could not dispute this position. Therefore, following the principle of consistency and the dismissal of SLPs, the present appeal for Assessment Year 2013-14 was also dismissed. The operative direction was the dismissal of the appeal.

The High Court held that the ITAT was correct in dismissing the Department's appeal. The Court found no substantial question of law involved. The reasoning was that Section 269SS prohibits the acceptance of loans or deposits otherwise than by an account payee cheque or draft. A loan or advance is a foundational fact for the applicability of Section 269SS. In this case, the assessee had surrendered Rs. 19,35,000/- as undisclosed income for AY 2010-11 and infused it into his accounts. This was not an acceptance of a loan or deposit from a third party. The Court noted that it was upon the Assessing Officer to have recorded a finding that the assessee had received a loan, deposit, or advance from a third party. In the absence of this precursor fact, a breach of Section 269SS could not be established, and therefore, the penalty under Section 271D was void. The Court concurred with the findings of the CIT(A) and the ITAT that there was no violation of Section 269SS.

The High Court concurred with the Tribunal's view. It held that the reassessment was not a case of change of opinion but was based on fresh information, specifically the statement of Shri Praveen Jain recorded under Section 132(4) of the Act. The Tribunal found that Shri Praveen Jain controlled the supplier firms, which were found to be non-existent and engaged in providing accommodation entries for bogus purchases. Shri Praveen Jain admitted this in his sworn statements. The assessee failed to prove the genuineness of the purchases from these concerns despite being asked to produce the parties and their books of accounts. The Court noted that the assessee failed to discharge the primary onus. Regarding the cross-examination, the Court observed that the assessee had failed to produce the concerned parties and their books of accounts as requested by the Assessing Officer. Furthermore, no prayer was made before the Assessing Officer to summon Shri Praveen Jain for cross-examination. Citing Supreme Court and Calcutta High Court judgments, the Court held that the belated claim of denial of cross-examination opportunity was untenable. Therefore, no substantial question of law arose, and the appeal was dismissed.

The High Court held that a statement recorded under Section 132(4) of the Act, and subsequently confirmed in a statement recorded under Section 131, cannot be discarded solely because the assessee retracted it. The Court emphasized that such retraction should generally be made within a reasonable time or by bringing it to the notice of higher authorities with convincing evidence. The significant delay of approximately eight months (237 days) in filing the retraction affidavit was considered crucial. The Court found that the ITAT had erred in summarily discarding the initial statements based on a belated retraction. The High Court allowed the revenue's appeal, answering the substantial question of law in favor of the revenue and against the assessee. The operative direction is to allow the appeal of the revenue.

The High Court held that the appeal did not involve any substantial question of law. The Court affirmed that Section 269T prohibits repayment of loans or deposits otherwise than by account payee cheque or draft. It emphasized that the existence of a loan or deposit is a foundational fact for the applicability of Section 269T. In this case, the assessee explained that the cash payment of Rs. 54,93,095/- was towards her membership contribution to ACCS. The Court found that the Assessing Officer had the assessee's cash book and it was incumbent upon him to establish that a loan or deposit existed from ACCS to the assessee, which was being repaid in cash. As there was no evidence on record to show the existence of such a loan or advance by ACCS, the cash payment did not fall foul of Section 269T. The Court also held that the Revenue's argument that the burden was on the assessee to prove non-violation of Section 269T was misconceived, as the burden lies on the party asserting a fact. Therefore, the penalty under Section 271E was uncalled for. The orders of the Commissioner (Appeals) and the ITAT were upheld.

The High Court dismissed the appeal. The reasoning was based on the submission made by the learned counsel for the appellant (revenue) that the appeal's tax effect of Rs. 28,08,240 was less than Rs. 50,00,000, and therefore, in light of Circular No. 3/2018 issued by the Central Board of Direct Taxes, the appeal might not be maintainable. The court found this submission persuasive and proceeded to dismiss the appeal on this ground. The ratio decidendi is that appeals with a tax effect below the threshold specified in CBDT Circulars are not maintainable. The operative direction was the dismissal of the appeal. The appellant was granted liberty to apply for revival if the case fell within the conditions stipulated in Clause 10 of the circular.

The High Court held that the writ petition is not maintainable against an order deciding objections under Section 148 of the Income Tax Act, 1961. While acknowledging that a writ jurisdiction may lie against a show-cause notice if it suffers from illegality, the court emphasized the self-imposed restriction of not substituting its opinion for that of the authorities. The court found that the Assessing Officer had "reasons to believe" that income had escaped assessment, as evidenced by the information provided regarding the petitioner being the beneficial owner of a bank account in the case of Munna Lal Pareek. The court noted that the Assessing Officer had furnished sufficient material, including the assessment and appellate orders in Munna Lal Pareek's case, leading to the belief that the petitioner's income needed to be assessed. The court distinguished the case of Cheer Sagar vs. CIT, where the issue was limitation, which was treated as a jurisdictional issue, unlike the present case. The court concluded that there was no infirmity in the orders passed by the Income Tax Authorities and that the petitioner could file an appeal if an assessment/reassessment order was passed. Therefore, the writ petition was dismissed.

The High Court held that the two arguments raised by the assessee, concerning the classification of trucks/dumpers as 'machinery' for higher depreciation and the applicability of specific depreciation rates, could not be raised for the first time before the High Court. The Court noted that the impugned orders of the CIT(A) and the Tribunal did not indicate that these arguments were ever presented before the lower authorities. The Tribunal's decision was based on judgments from the Madhya Pradesh High Court (M/s. Anamay Construction Co. vs. UOI) and Kerala High Court (Gaylord Constructions), which held that an assessee using its own trucks for its main business (like civil work) is not entitled to higher depreciation as it is not in the business of hiring out vehicles. Consequently, the Court found no substantial question of law arising and dismissed the appeal.

The Tribunal held that the assessee failed to furnish any explanation regarding the source of cash deposits made in his bank account. It noted that the assessee had not offered any explanation before the Assessing Officer (AO) or the Commissioner of Income Tax (Appeals) (CIT(A)) during the penalty proceedings. Consequently, when no explanation whatsoever was furnished by the assessee, the question of such explanation being bona fide did not arise. The Tribunal distinguished the judgments relied upon by the assessee, stating they were rendered on specific facts not similar to the present case. The High Court agreed with the Tribunal's view, finding that the assessee's failure to explain the deposits justified the penalty. The Court also noted that a coordinate bench of the High Court had previously dismissed the assessee's appeal concerning the assessment order (ITA No. 103/2015) by holding that the Tribunal's findings were just and proper and no substantial question of law arose. Therefore, the High Court found no infirmity in the impugned order and dismissed the appeal, holding that no substantial question of law arose.

The Tribunal found no infirmity in the impugned order dated 9.2.2018 passed by the ITAT. The reasoning was that Section 56(2)(viib) of the Income Tax Act permits different methods for determining the fair market value of unlisted shares, and Rules 11U and 11UA specifically allow the use of the discounted free cash flow method for unquoted equity shares. The appeal did not dispute the specific index applied in the valuation. Therefore, the Tribunal upheld the ITAT's decision, which had accepted the assessee's valuation based on the discounted free cash flow method. The operative direction was to dismiss the appeal.