The assessee was engaged in business of software development solution and management. The assessee incurred expenditure in connection with development of a new software product and treated expenditure as a part of capital work in progress for assessment years 2004-05 to 2007-08. However, new product never came into existence and development of this software was abandoned and assessee then claimed whole capital work in progress as revenue expenditure in assessment years 2006-07 and 2007-08. The assessing officer held that expenditure incurred was capital in nature and disallowed same. The claim of the assessee was allowed by the Income-tax Appellate Tribunal. On appeal by the Revenue to the High Court, the High Court held that since no new asset came into existence which would be of an enduring benefit to assessee, expenditure could only be said to be revenue in nature. Accordingly the High Court confirmed the order of the Tribunal. {See Pr. CIT v. Trigent Software Ltd. [2023] 147 taxmann.com 52 / 457 ITR 765 (Bom.)}

On SLP filed by the revenue against the judgment of the High Court, the Supreme Court, after hearing the plea of revenue, held that no case for inference is made out under Article 136 of Constitution of India. Accordingly the SLP was dismissed.

Pr. CIT v. Trigent Software Ltd. [2024] 163 taxmann.com 699 (SC)

Section 32(2) of the Act was amended by the Finance Act, 2001 with effect from 1-4-2002. The effect of the amendment was that the unabsorbed depreciation, which was hitherto allowed to be carried forward for a period of eight assessment years subsequent to the year in which the depreciation could not be set off, was allowed to be carried forward to subsequent years without any restriction on the number of years. On the basis of the said amendment made by the Finance Act, 2001, the assessee claimed that the unabsorbed depreciation pertaining to assessment year 1997-98 will get a fresh lease of life and the same will be available to be carried forward perpetually without any restriction on the number of years. The assessing officer did not agree with the same. The assessing officer held that since the provisions of section 32(2) as applicable in the year 1997-98 restricted carry forward to only eight years, the benefit cannot be carried forward beyond eight years from AY 1997-98. The claim of the assessee was however accepted by the Tribunal. {See Pr. CIT v. Vishaldeep Spinning Mills Ltd. [2023] 153 taxmann.com 372(Guj.)}

On SLP filed by the revenue against the judgment of the High Court, the Supreme Court, held that they are not inclined to interfere with the judgment of the High Court. Accordingly the SLP was dismissed.

Pr. CIT v. Vishaldeep Spinning Mills Ltd. [2024] 163 taxmann.com 15(SC)

For the assessment year 2015-16, the notice u/s. 148 was issued by the jurisdictional assessing officer on 27-8-2022. The notice issued did not contain the DIN. The assessee challenged the validity of the notice issued in a writ petition on various grounds. The primary contention of the assessee were (a) that the notice is time barred considering the provisions of proviso to section 149(1) ; (b) that the notice issued without DIN is not a valid notice (c) that in view of section 151A of the Act and the notification dated 29-3-2022 issued thereunder, the jurisdictional assessing officer does not have any power to issue the notice u/s. 148 of the Act and the said powers are available only with the Faceless Assessment unit in terms of section 151A of the Act. The department contended that the notice was within the time considering the time limit available as per the amended section 149(1)(b) of the Act. The department also relied on the relaxation of time allowed by TOLA 2020 in this context ; (b) For DIN the department argued that non availability of DIN will not vitiate the notice and the defect can be cured ; (c) The department argued that with effect from 29-3-2022 both the jurisdictional assessing officer (JAO) and the Faceless Assessment Officer (FAO) have concurrent jurisdictions to issue the notice u/s. 148 of the Act.

The High Court held that (a) The notice u/s. 148 for the assessment year 2015-16 could not have been issued beyond the period of six years i.e. beyond 31-3-2022 as per the time limits laid down by section 149 of the Act, prior to amendment by the Finance Act, 2021. Accordingly applying the proviso to the amended section 149(1) of the Act notice could not have been issued beyond 31-3-2022. The High Court held that the time limit of ten years as available under the amended section 149(1)(b) will not be relevant considering the proviso to section 149(1). The High Court also held that the extension of time allowed by TOLA 2020 was not applicable for the assessment year 2015-16. (b) In so far as the DIN, the High Court held that the notice issued without DIN is not a valid notice and therefore the same deserves to be quashed (c) The High Court rejected the argument of the department that there is a concurrent jurisdiction available to both JAO and FAO and accordingly held that considering the provisions of section 151A of the Act, post 29-3-2022, the JAO does not have any power to issue notice u/s. 148 of the Act and this power is vested in only the Faceless Assessment Officer i.e. FAO. The notice issued was not valid on this ground as well.

Hexaware Technologies Ltd. v. Asst. CIT [2024] 162 taxmann.com 225 (Bombay)

It was held by the Tribunal that the notice issued u/s. 148 of the Act by the Jurisdictional Assessing Officer was not valid considering the provisions of section 151A of the Act and the notification dated 29-3-2022 issued thereunder. The Tribunal rejected the argument of concurrent jurisdiction available to the JAO and the FAO.

Swarn Singh v. ITO [2024] 163 taxmann.com 745 (Amritsar Trib.)

Assessee company underwent Corporate Insolvency Resolution Plan. The assessee was granted approval of resolution plan by NCLT under IBC and said company was revived and rehabilitated by new management. Meanwhile, the assessing officer passed assessment order under section 143(2) of the Act for assessment year 2022-23 and issued demand notice under section 156 of the Act. The assessee challenged the notice of demand under a writ petition before the High Court.

The High Court noted that upon approval of resolution plan, a new management took over assessee company, in order to implement resolution Plan as per the scheme of IBC, on a clean slate basis. Once resolution plan was duly approved by adjudicating authority under section 31 (1) of IBC, 2016, claims as provided in resolution plan shall stand frozen and it would be binding on corporate debtor and its employees, members, creditors, including Central Government, any state government or any local authority, guarantors and other stake holders. Since successful Resolution Applicant started running business of assessee-company on a fresh slate, impugned order and demand notice were to be set aside.

National Sewing Thread Co. Ltd. v. Dy. CIT [2024] 163 taxmann.com 768 (Delhi)

Assessee was an income tax payee and had been regularly filing its income tax returns for last 23 years. Assessee could not file its return of income under section 139(1) for assessment year 2022-23 for reason that accountant of assessee fell ill and subsequently on account of such illness had to resign due to which books of accounts could not be finalized which resulted in delayed finalization of accounts. Assessee sought for condonation of delay on ground of genuine hardship. CBDT refused to condone delay on ground that assessee had adopted a casual approach and took more than three months’ time to find a suitable replacement for its accountant which constituted wilful negligence on part of assessee and same did not constitute genuine hardship.

On writ petition filed before the High Court, it was noted that materials on record did not substantiate any wilful negligence on part of assessee. The delay did not appear to be on account of any negligence or malafide of assessee as illness and subsequent resignation of accountant was an entirely unforeseen event which amounted to genuine hardship. Therefore, delay in filing of return was to be condoned in terms of section 119(2)(b) of the Act.

Anmol Feeds Pvt. Ltd. v. Union of India [2024] 163 taxmann.com 407 (Calcutta)

Assessee’s deceased father, along with his family members, had entered into joint development agreement with a developer to develop land into residential flats and commercial portion of property was shared in ratio of 50:50. The agreement was entered into the assessment year 2012-13. The Assessee claimed to have computed long term capital gain for assessment year 2015-16 and also paid tax for his father’s share of capital gain in pursuance of joint development agreement. The assessee could not file the Return of Income due to limitation period for filing return of income. The assessing officer had taken into account share of assessee’s father and calculated long-term capital gains and made addition towards same at certain amount during relevant assessment year 2012-13. This was confirmed by the CIT (A).

On further appeal to the Tribunal, the assessee contended that although joint development agreement was entered in assessment year 2012-13 but nothing had happened on ground that developer had not started any construction. Only after sanction of plan developer had undertaken development activities, therefore, assessee had computed long term capital gains for assessment year 2015-16. The Tribunal held that just because joint development agreement was entered, it could not be said that transfer took place. The Tribunal observed that unless parties to agreement acted upon in pursuance of terms and conditions of agreement, it could not be said that event of taxation arose only on signing agreement. Since developer had obtained sanction plan from concerned authorities for assessment year 2015-16, assessee had rightly computed capital gain for assessment year 2015-16 and paid taxes.

Kiran Reddy Gangidi v. ITO [2024] 163 taxmann.com 766 (Hyderabad Trib.)

Assessee was engaged in trading of cloth. The assessee filed his return under section 44AD. On basis of information from Bureau of Investigation that there were certain deposits in bank account of assessee in name of his proprietary concern, Assessing Officer reopened assessment in for assessment years 2015-16 ad 2016-17 in the case of the assessee. Assessee submitted that he had not opened any of Bank accounts and they might have been done by some unknown person by using fake identity of assessee. Assessing Officer was not satisfied with submissions of assessee and he was of view that said sum was to be treated as unaccounted sales of assessee and he assumed this figure as turnover of assessee and estimated profit at 8% and estimated unexplained investment. The assessee preferred an appeal against the assessment orders. Later on the orders of the assessing officer were subjected to revision proceedings under section 263 of the Act on the ground that the alleged credit of sales ought to have been treated as unexplained cash credit instead of treating the same as gross turnover of the assessee. The revision was done as per the proposal forwarded by the Additional Commissioner to the CIT. The assessee challenged the revision orders before the Tribunal.

The Tribunal held that the Commissioner had just reproduced proposal sent by Additional CIT and there was no independent application of mind at his end for taking cognizance under section 263 and therefore the order passed under section 263 was to be quashed. The Tribunal also laid significance on the fact that the said issue was pending in appeal before Commissioner (Appeals) and accordingly no revision could have taken place in accordance with clause (c) of Explanation – 1 to section 263 (1) of the Act.

Rajesh Kumar Jalan v. Pr. CIT [2024] 163 taxmann.com 574 (Kolkatta Trib)

There was a reporting by auditor in tax audit report (TAR) which said that assessee had collected tax at source on sales of scrap, however, amount so collected had not been deposited with interest thereon and no return of TCS was filed till date of TAR. On basis of above mentioned qualified reporting in TAR, an addition of certain amount had been made by CPC for violation of provisions of section 43B. The same was confirmed by the CIT (A).

On appeal to the Tribunal, it was noted that TCS amount was not a sum payable by assessee, it was income tax of buyers, collected and retained by assessee as per provisions of section 206C and recorded through journal entries, and held by assessee as custodian of Government. The TCS collected was duly reflected as liability in audited balance sheet as at 31/03/2022. Since said amount of “income tax” of buyers, could not be debited in profit and loss account and claimed as a deduction, assessee was not hit by provisions of section 43B and addition made to income of assessee was to be deleted.

Aay Kay Manufacturing Co. v. ITO [2024] 163 taxmann.com 333 (Amritsar Trib.)

Assessee and his family was engaged in money lending business. This was substantial source of income for assessee’s family. During course of survey conducted upon assessee, promissory notes were found against which assessee family advanced loans. On basis of these notes, it transpired that there was change in debtors’ balances as on 31-03-2016 and debtor’s balances as on 15-09-2016 - Since assessee could not explain said difference, he agreed to offer same in his return of income to extent of certain amount whereas balance sum was offered in hands of assessee’s son. While filing the Return of Income, the assessee treated same as interest income and offered additional income as business income and paid due taxes thereon. The assessing officer observed that since assessee could not substantiate fact that advances were out of money lending business, the income was assessed as undisclosed investments under section 69. The order of the assessing officer was confirmed by the CIT (A).

On further appeal to the Tribunal, the Tribunal noted that sundry debtors would keep on changing continuously in view of fact that certain advances would be given and certain advances would be received back by assessee at any given point of time. However, the assessee had already offered differential of debtors between two dates as his undisclosed income. The Tribunal also noted that these debtors arise out of money lending business being carried by assessee for last more than 20 years. Further, there was nothing on records that assessee had any other sources of income. The Tribunal held that any discrepancy in debtors, in such a case, would be part and parcel of assessee’s money lending business and it could very well be said that discrepancy had arisen out of unaccounted income earned by assessee from this business only. Therefore, the same would be taxable as ‘business income’ only. The Tribunal held that on the facts of the case, the assessee had correctly offered additional income as ‘business income’ only and provisions of section 69 read with section 115BBE would have no application.

Rameshlal Kailash v. ITO [2024] 163 taxmann.com 379 (Chennai Trib.)