Section 56(2)(x) of the Income Tax Act
The decision most relied on for Section 56(2)(x) is ACB India Ltd. v. ACIT (374 ITR 108), cited in 364 of the 310 judgments on BharatTax that turn on this section.
Leading authorities on Section 56(2)(x)
When computing disallowance under Section 14A of the Income-tax Act using Rule 8D of the Income-tax Rules, only investments that have actually yielded exempt income during the relevant previous year are to be considered for the calculation.
Reassessment proceedings initiated mechanically or based solely on existing records without fresh material are invalid. Additions to income, especially for investments, require the Assessing Officer to conduct independent inquiry and establish adverse material beyond mere allegations.
Proceedings become fatal if principles of natural justice are violated, such as when seized material is not provided to the assessee or cross-examination of a person whose statement the Assessing Officer relies upon is denied.
Employees' contributions to provident fund or ESI are allowable as a deduction if deposited by the due date for filing the return of income, even if paid beyond the due date prescribed under the respective fund laws. This applies retrospectively due to the amendment to Section 43B.
Section 41(1) of the Income-tax Act cannot be invoked if the assessee has not been granted a deduction for the relevant liability in earlier years.
An adverse inference cannot be drawn against an assessee solely based on uncorroborated loose papers found during a search or on a statement made during the search that is later retracted, unless the Assessing Officer conducts independent enquiry to establish the facts.
To make an addition under Section 69B for undisclosed investment, the Revenue must first prove that an understatement of investment has occurred and that the assessee made the undisclosed investment. The burden of proof lies with the Revenue, and additions cannot be based merely on presumptions or assumptions without corroborative material.
The amendment introducing a tolerance band (safe harbour) under section 50C, allowing a difference of up to 10% between actual sale consideration and stamp duty valuation, applies retrospectively. If the difference falls within this limit, the actual sale consideration is adopted as the full value of consideration for computing capital gains.
The proviso to Section 113 of the Income-tax Act is clarificatory and applies retrospectively to block assessments under Chapter XIV-B. It rejects the argument that the amendment is prospective, applying only to periods after June 1, 2002, and establishes a fundamental doctrine of retrospective applicability of statutory provisions.
The disallowance under section 40(a)(ia) for non-deduction or non-remittance of TDS does not apply if the assessee establishes that the recipient has already declared the corresponding income and paid tax on it, as there is no actual loss of revenue. This principle, reflected in the second proviso to section 40(a)(ia), applies retrospectively.
Judgments on Section 56(2)(x)
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