Income Tax

Sec.2(24) - Rental Income - If the receipt does noot fall within the ambit of any of the sub-clauses in the section, it may still be income if it partakes of the nature of income. The idea behind providing an inclusive definition is not to limit its meaning but to widen its interest. [ P.J.Eapen vs C.I.T. ITR No. 168 of 1995 . Dated 30-9-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan(J)]

Sec. 20(2)- Interest on purchase of securities paid by the bank for the broken period is an allowable deduction under the heading "Profits and Gains of business or profession" in the computation of total income. [C.I.T. vs South Indian Bank Limited. 1999(2) KLT 3 = [1999] 105 Taxman 173 = 1999 KLJ Tax Cases 76 . P.A.Mohammed, P.Shanmugham & G.Sivarajan (JJ)]

Sec. 23 - If the amount received or receivable is in excess of the sum for which the property might reasonably be expected to let from year to year, the amount actually received or receivable shall be the annual value of the property for the purpose of sec.22. After 1975b amendment, if the actual annual rent received or receivable is in excess of the notional annual value, the actual annual rent shall be deemed under Sec.23 (1)(b), to be the annual value, for and from assessment year 1976-77 [ C.I.T. vs Johny Joseph. ITR 246 & 247 of 1997. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 32 (1) (iv) - Written down value as at the beginning of the year without further reducing it by the amount of initial depreciation. Effect of deletion of underlined portion of clause (iv) of Sec. 32 (1) by the Finance Act, 1983 will have effect only in cases where initial depreciation under clause (iv) is granted in respect of specified assets with effect from 1- 4- 1994. Principle laid down in (1959) 36 IT 350 is no help to revenue in this case. Effect of Circular No. 372 , dated 8-12-1983. [ C.I.T. vs M/s. Asian Tehcs Ltd . I.T.R. 115/1995, Dated 29-7-1999. K.K.Usha (J) & R.Rajendra Babu (J)]

Sec. 34 - Depreciation - A claim has to be made by the assessee for a relief to which he was entitled and the Income Tax Officer's duty was only to advise him of it. It is open to the Income Tax Officer to grant depreciation if particulars are available notwithstanding non-claim or withdrawal by assessee in a revised return. [C.I.T. vs M/s.Kerala Electric Lamp Works Ltd. ITR.No. 187 of 1996.Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 35 (1)(b) - Commission payment made to parties to bring about export sales will be entitled to weighted deduction under Sec.35B of the Income Tax Act, 1961 irrespective of whether the same is incurred in India or outside India. Sub-clause (ii) and sub-clause(vi) do not contain the provision that the expenditure has to be incurred outside India as in sub clause (iii) and sub-clause(viii) . There is no legal infirmity in the assessee's claim under sub-clauses (ii), (vi) and (vii). [CI.T vs M/s. N.J.Albert. I.T.R.No. 187 of 1982 . K.K.Usha & R.Rajendra Babu (JJ) ]

Sec.35B (viii) - weighted deduction - The expenditure in order to qualify for weighted deduction is required to have been incurred wholly and exclusively on performace of services outside India in connection with, or incidental to, the execution of any contract for supply outside India of such goods. Merely because the expenditure was incurred in India for supply outside India, peruse it would not qualify for weighted deduction. [The Commissioner of Income Tax v. M/s. Aspinwall Co. (Travancore) Ltd. I.T.R.No.106 of 1997, dated 12-11-1999. Chief Justice Mr. Arijit Pasayat & K.S. Radhakrishnan, J.]

Sec. 37(1) & 40A(10) - Expenditure made towards contibution of the share of expenditure in running of the school, wherein the children of the employeees are studying. As the expenditure is for the smooth functioning of the business of the assessee and also an expenditure wholly and exclusively for the welfare of the employees of the assessee and thus allowable as expenditure. [ C.I.T. vs. N.Radhakrishnan . ITR.No. 37 of 1996, Dated 25-10-1999. K.K.Usha & R.Rajendra Babu (J&J) ]

Sec. 36 (1)(iii) - Advances to the partners , their relatives and sister concerns are not for business purposes - No interest was charged on these advances -Assessee firm is not the beneficiary of such investments, the nature of investment or the utilisation of such advances has no relevance. Assessee is not entitled to proportionate interest payment to bank in respect of the amounts so advanced by the Assessee to the partners . [The Commissioner of Income Tax Vs. M/s.V.I.Baby & Co., 2001 (3) KLT 952 . [P.K.Balasubramanyan & C.N.Ramachandran Nair (JJ)]

Sec.41(2) -Insured assets destoryed by fire - Replaced the assets. By exercising the option to replace the damaged assets, the insurer discharged his liability under the terms of the policy to make goods the loss sustained , in specie , and in such a case there is no question of payment of money at all as the liability of the insurer to make the payment to cover the loss sustianed by the insured would cease on the exercise of the option rendering the contract one for re-instatement ab initio which would mean that the contract between the insurer and the insured would be deemed in law to have always been from the inception one for reinstatement only and not for payment of money. Consequently , there was no question of payment of money by the insurance company and hence the provisions of Sec.41(2) were not attracted. [C.I.T.vs . Cochin Refinaries Ltd . I.T.R.No. 109 OF 1996. Dt. 23-9-1999. Arijit Pasayat & K.S.Radhakrishnan {J&J}]

Sec. 43-B .Deduction claimed in respect of customs duty payble for the year 1982, in the assessment year 1983-84 , on the basis of the orginal order dated 30-10-1980 by the Customs Authorities . The said order was annulled by order dated 28-3-1981 .Demand made by the Collector on 27-3-1982. Liability accrued the moment the demand was raised by the concerned authorities under the relevant Act and it was not permissible to contend that there was no accrued liability merely because the assessee had been disputing the liability . As the demand was still subsisting , the liability also subsisted and accrued during the relevant previous year. Claim in respect of the liability to customs duty allowed. [ C.I.T. vs M/s. O/E/N. India Ltd. ITR.No. 99 of 1996 . Dated 30-9-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan(J)]

Sec. 43B - Payment of the P.F.Amount after the prescribed period - The amount is deductible only if the assessee credits the amount to the employees' account in the relevant fund on or before the date by which he is legally or contractually required to do so. The right to deduction would be lost even if the sum is credited after the due date. It cannot be an indefinite date left to the choiice of the assessee. [C.I.T vs. M/s. South India Corporation Ltd. ITR.No. 17 of 1996. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 44 - Even whlle making best judgment assessment, the assessing officer has to make rational estimate and some amount of guess work notwithstanding, there is no socpe for fixing an abnormaly high and unreasonable figure. There must be some plausible basis for fixing the turnovers. [ITO vs M/s. Vijaya Automobiles. ITAppeal No. 75 of 1999. Dated 2-11-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 44 -Assessment - The burden of showing that a particular transaction is benami and the owner is not real owner always rests on the person asserting it to be so and this burden has to be strictly discharged by adducing legal evidence of a definite character which would either directly prove the fact of banami or establish circumstances unerringly and reasonably raising an inference of that fact. [C.I.T vs K.Mahim Udma . ITR.Nos. 180 to 192 of 1997. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec.80 - After the amendment in Sec. 22(2A) of the Act (w.e.f. 1-4-1989) , required the assessee to file a return if (a) loss was incurred in the business, and (b) the Income-Tax Officer had not served him with a notice under Sec.22(2) to file a return, in order to be entitled to carry forward such. Under the present Act, if no return is filed as required, the right to carry forward the loss would be lost. [C.I.T. vs Gunavathi Dharmasy. ITR. 37 of 1997. Dated 25-9-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J).]

Sec.80H & Y - Shrimps and prawns - There is no difference between raw shrimps and prawns and processed or forzen shrimps and prawns .In common parlance they remain the same and continue to be known as shrimps and prawns. When raw shrimps and prawns are subjected to the process of cutting of heads and tails , peeling , devaining, cleaning and freezing, they do not cease to shrimps and prawns and become other distinct commodities. [C.I.T. vs. M/s. Poyilkada Fisheries P.Ltd . I.T.R No.6 of 1997 .22nd September, 1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J). ]

Sec. 80 HHC - Export business - Interest received by it from the fixed deposit cannot be treated as business income . (1985) 154 ITR 345 relied on. [M/s. Nanaji Topanbhai & Co vs Asst.Commer of Income Tax. .I.T.A.No.S 73 & 74/99, Dated 19-7-1999. K.K.Usha & R.Rajendra Babu {JJ}]

Sec. 80CC - Claim for deduction in respect of sum deposited in Public Provident Fund is maintainable, even though the contribution had not come out of the income chargable to tax. [ C.I.T vs. Abraham George Karakkalil. ITR.No. 89 of 1997. Dated 28-10-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 80 HHA (8)(b) - Press note issued by the Department of Industrial Development of the Government of India, clarifying as to on what items were to be included and what items were to be excluded in arriving at the value of plant and machinery for the purpose of treating the Unit as a Small Scale Industrial Undertaking. Tribunal directed to consider whether the press note whether the notification is under the Industries (Development and Regulation) Act, 1951. [ C.I.T vs M/s. Kunnath Paper Mills Ltd. ITR.No. 188 and 189 of 1996. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 80 HH & 80 J - Production or manufacture - Processing of fish. Activites carried on by the assessee amounts to an activity of "production" if not "manufcture " Business of catching, purchasing, processing and exporting raw fish, undergoes extensive processing by way of peeling, decapitating ,etc.[ CIT vs Bharath Sea Foods. (1999) 152 CTR 503 (FB) K.K.Usha, K.Narayana Kurup & S.Marimuthu (J.J)]
,

S.80 HHC - Deduction - Assessee carrying on domestic trade as also export - Formula for ascertainment to be under sub-s.(3)(b) of S.80 HHC. [Commissione of Income Tax Vs. Parry Agro Industries Ltd., 2002 (2) KLT SN 163 Page No.133. . V.P.Mohan Kumar & K.K.Denesan (JJ)]

Secs 80 HHC & 154 - Adjustment of amount in respect of assessee's claim for deduction - intimation to the assessee - petition for rectification filed in regard to the deduction claimed under Sec. 80HHC disallowed - Rejection proper - Claim for deduction prima facie found to be inadmissible -Assess has no case that interest income qualifies for inclusion in computation of export profit - Therefore there is no mistake apparent in so far as the disallowance of inadmissible deductions claimed .[M/s. Abad Enterprises vs C.I.T. ITR.No. 99 of 1998. Dated 18th October, 2001. P.K.Balasubramanyan & C.N.Ramachandran Nair (JJ)]

Sec. 80HHC - Assessee engaged in various business -Interest income received by the assessee from fixed deposits in the bank and the dividend received from the SBI Magnum whether constitute "business income" for the purpose of computation of eligible deduction on export profits ? Whatever be the formula adopted for computation of export profit under this section the same should not involve in the transfer of profit from local business to export business . [The Commissioner of Income Tax Vs. Jose Thomas, 2002 (1) KLT 388. (P.K.Balasubramanyan & C.N.Ramachandran Nair (JJ)]

Sec. 80HHC - Business profit of the assessee was assessed by the assessing officer at a higher figure but the assessee had only claimed deduction of a lesser sum supported by creation of reserve in the profit and loss account of the previous year in respect of the sum claimed as deducted . In such a situation, the assessee would be entitled to deduction under Section 80HHC of the Act only to the extent of the amount covered by the reserve created in the profit and loss account of the previous year.[Commissioner of Income Tax Vs. M/s. Parekh Brothers, I.T.R.No.29 of 1998, dated 13th November, 2001. (P.K.Balasubramanyan & C.N.Ramachandran Nair (JJ)]

Sec.80-I - Meaning of "construction activity" . The word "production" has a wider connotation than the word " manufacture". The expressions "manufacture" and "produce" are normally associated with movables-articles and goods. But they are never employed to denote construction activity of the nature involved in construction of dam or a building. Assessee engaged in pile foundation work, canot be construed to involve a process of manufacturing or process or production. [C.I.T. vs M/s.Geo Tech Foundations and Constructions . ITR.No. 13 of 1997. Dated 24-9-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan(J)]

Sec. 80-I - Retreading of a tyre is not manufacture or production of a new article -Worn out tyre becomes usable after retreading . [CIT vs M/s. Vijaya Retreaders. 2002 (1) KLT 292. Dated 10th August, 2001. S.Sankarasubban & S.Marimuthu (JJ)]

Sec. 131 read with Sec.133A - Documents retained by the Income-tax authorities for completing the assessment .Representations made to return the documents. Department has no objection to return documents if same were not tampered with and produced as and when necessary.Officeer is directed to return the seized documents after taking their photocopies and getting them authenticated by petitioners. [ R.T.Rajeswaray vs Dir.I.Tax. [1999]105 Taxman 441 (Ker). G.Sivarajan {J}]

Sec. 131(I)(d) - Deputy Director of Income-Tax (Investigation) has got the power to call for a valuation when he takes up investigation. [G.Sukesh vs Depy. Director of Income-Tax and others. O.P.No. 18383 of 1999-L dated 3-9-1999. K.S.Radhakrishnan {J}]

Sec. 132 A- Cash seized by the police at the airport. Assessee explained the source . Department is either directed to return the money or adjust it towards the arrears of amount due. [ Prathap.K .Pothen vs Circle Inspector of Police. [ 1999] 105 TAXMAN 380 (Ker). K.Narayankurup{J}]

Sec.132 - Income Tax Rules Search cannot be prolonged unreasonably without justification. The power to prohibit person from removing or parting with documents. The power has to be exercised in an honest manner and search warrants cannot be indiscriminately issued as a matter of policy. [Dr.C.Balakrishanan and others vs. C.I.T. (1999)237 ITR 70. P.Shanmugham {J}]

Sec.139 & 142 (2) - Assessee not filing return. Not asked for extension of time for filing return. Best judgment assessment was made. Search took place long after the filing of the return. It was held by the Court that nothing prevented the assessee to file return . The firm did not make use of opportunity given by Department to take copies of seized material. Cancellation of registration of the firm in the circumstances is proper. [Hotel Shah & Co vs.Asst.Commissioner of Income Tax. (1999) 155 C.T.R. (Ker) 279. ]

Sec. 140- Signature of unauthorised person in return renders the return defective to make it nonest. "Defect"means, a blemish, fault or imperfection. It is lack of something necessary for compelteness or perfection. The use of words "himself" or "by him" or "under his hand" or "personally" indicate that even an authorised agent is precluded from signing on behalf of the principal. [ CIT vs M/s. Masoneilan (India) Ltd. ITR.No. 126/1997. Dated 15-10-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan(J)]

Sec. 142(2A). - Chartered Account's submitted a bill for conducting special audit of assessee's accounts at the instance of Commissioner who allowed only 70 per cent thereof as expenses and audit fees. On going through the details of the bill it cannot be stated that it arbitrary or reconsideration is necessary. [Pradeep Maheswari vs Commissioner of Income Tax. J.B.Koshy {J} [1999]105 Taxman 351]

Sec. 143(1A) - Section should be deemed to be in statue book from 1-4-1989 onwards. Income-Tax Officer was bound to consider whether the assessee was entitled reduction or waiver of interest under the added proviso and in interest was not charged it could not be said that there was necessarily a mistake apparent from the record. [ C.I.T vs. Kerala State Coir Corporation. ITR.No. 245 of 1997. Dated 19th July, 2001. S.Sankarasubban & A.Lekshmikutty (J&J)]

Sec. 145 - Change in method of valuation . Whenever there is a change in the method of valuation , there is bound to be some distortion in the calculation of profits in the year in which the change takes place. The assessee had been including interesxt as an element of cost of production for valuation of the closing stock. But the Accountant General (Audit) Kerla, in the commented that the inclusion of interest charges for valuation of closing stock of finished goods resulted in overstatement of profits. The assessee changed the method of valuation . The change adopted by the assessee was bonafide and intended to be followed in the future years and it was not adopted for the same assessment year only but to be consistently followed for the valuatio. [C.I.T. vs The Travancore Cochin Chemicals Ltd. ITR.NO. 37 of 1999. Dated 25-10-1999. K.K.Usha (J) & R.Rajendra Babu (J)]

Sec. 145(2) - Packing charges and incidental charges were added to the sale amounts in order to arrive at the total sale amount. Tribunal recorded a finding on facts that reasonable margin of time was necessary for the pattials ot reach the assessee. That being the conclusion , the margin of 50% attributable to the time gap was fixed. Though it is triate law that profits of a particular year has to be determined in that year and if the accounts are not reliable , resort can be mde to Sec.145(2) of the Act, yet it would depend upon the factual position. [M/s. Iritty Trading Co vs C.I.T. ITR.No. 4 of 1997. Dated 25-10-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 145 - When an assessee bonafide changes his method of accounting and satisfies the department that he intendes to adopt changed method of accounting thereafter or that he has, in fact, adopted it thereafter, that satisfies the requirement of Sec. 145. When assessee continues with one method of accounting with the changed method, it becomes his regular employed method within the meaning of Sec. 145(1). Assessing officer is bound to base his computation on the changed method provided that income is properly deduceable from such method. If, however, the changed method is not followed regularly by assessee , taxing authority can adopt earlier method of accounting. This is so, because in such a case, it cannot be said that assessee had followed the earlier method regularly. In view of the intermediary change in the method of accounting, such a case will fall under this section. [Ms/. Abad Fisheries. vs C.I.T. ITR.No. 220/1997. Dated 6-11-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 148 -Reopening of assessment - Information received that a Hall belonging to a family club was rented out to non-members - bonafide reasons for reassessment. [ Trivandrum Club vs The Assistant Director of Income Tax., 2002 (2) KLT 29. . J.B.Koshy (J)]

Sec. 154. Appeals pending before Tribunal - Assessee making claim petition before the assessing officer for the rectification of the assessment order for the year in respect of expenditure incurred wholly and exclusively for peroformance of services in connection with execution of contracts for supply of service and facilities at Butan. In order to bring an application under Sec. 154, the mistake must be "apparent" from record. "Apparent" means open to view , visible , evident , appears, appearing as real and true , conspicuos, manifest , obvious , seeming. Section 154 does not enable an order to be reversed by revision or by review , but permits only some error which is apparent on the fact of the recaord to be corrected. [M/s. Asian Techs Ltd vs. C.I.T ITR.No. 240/1997. Dated 6-11-1997. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 147 (a) - Assessment of capital gains - Notification for acquisition was issued under the Land Acquition Act - Assessment of capital gains on the basis of notification is not legally correct. Possession of the land does not vest in the Government on the date of publication of the notification, but it vests in the Government only after taking actual possession by declaring to do so. [C.I.T vs Sheggy Abdulla. I.T.R.No. 114 of 1997. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 147 - Reassessment proceedings - Bad debts - writing off - not permissible - There is no finalisation of accounts - beleted claim to to off-set the suppressed income detected by the Department on search - Writing off of bad debts cannot be permitted in re-assessment - proceedings initiated after the finalisation of accounts . [Commissioner of Income Tax Vs. M/s.Hotel Ambassador, 2002 (1) KLT 345, (P.K.Balasubramanyan & C.N.Ramachandran Nair (JJ)]

Sec. 147 - Assessment made on 20-3-1993 - Appeal pending - Re-assessment during the pendency of the appeal - Assessing authority could not have issued yet another notice for reassessment in terms of this section . An order becomes final only when the appeal filed against it is finally decided . By holding that the appeal has become infructuous because of the second order of the assessing authority , the Tribunal has committed a substantial error of law warranting correction . High Court can determine any issue which has not been determined by the appellate tribunal. [CIT vs. P.N.Krishna Kumar . 2001 (3) KLT 794. .P.K.Balasubramanyan & C.N.Ramachandran Nair (JJ)]

Chapter XIV A- 158 B- Block Assessment - Special procedure- When the assessment is for a block period, then it is not necessary to find out whether the income was below the taxable limit or not [The Commissioner of Income Tax Vs. M.M.George, 2002 (1) KLT 432. (S.Sankarasubban & C.N.Ramachandran Nair (JJ)]

Sec. 164 (3) Explanation 2 - Maximum marginal rate - Meaning - It admits is that the rate on the maximum slab of income for association of persons is to be treated as the maximum marginal rate of tax for the purpose. [The C.I.T. Vs. M.s.C.V.Sivakaran Family Trust, 2002 (1) KLT 838, dated 17th December, 2001. (S.Sankarasubban & C.N.Ramachandran Nair (JJ)]

Sec. 172 (2), (4) & (7) - Chargeable profits - Unless an assessment was made under the IT Act , there cannot be said to be any assessment on total income. A person who is required to be covered and controlled by the provisions of Sec.172 is not an assessee. [ C.I.T vs Taiyo Gyogyo Kabushiki Kaisha. 2001(1) KLT. SN.44.P.41. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 176 (3A) - Arbitration award passed after the dissolution of the firm - It is to be noted that sub-sections (3A) and (4) constitute exceptions to the rule that business or professional receipts are chargeable only if business or profession is carried on in the year of account. For the purpose of assessment, there is well marked distinction between "discontinuance" and "succession". While "discontinuance" refers to a complete cessation of business "succession refers in a mere change of ownership.Conception of succession excludes the conception of discontiunance. The very fact that the income has been received by the four partners is, as stated above, a factor while nullifies the stand taken by assessee that the work done was independant.[C.I.T vs M/s. Paily Pillai and Co. ITR.No. 146 of 1996. Dated 1-11-1996]

Sec. 184 - Rejection of application for registration of firm - Bid in abkari auction by one person - No evidence to show he has bid on behalf of others -Rejection of application for the registration of firm is correct. [K.T.Mathew vs. Asst.Commissioner of I.Tax. O.P.No. 13308 of 1994. Dated 31-10-2000. M.R.Hariaharan Nair (J)]

Secs. 209A, 210, and 273 - Imposition of penalty - Assessee filed estimate of advance tax payable by him before the due date but failed to remit advance tax in accordance with the estimate .In a case after receiving notice under Sec. 210, assessee furnishes an estimate showing advance tax payable at nil, thus wiping off the section 210 demand, he cannot be penalised under Sec.221 but exposes himself to action under Sec. 273(2)(a) if the estimate is found to be knowingly untrue. Conversely , in cases where an assessee is under an obligation to furnish a statement/estimate because of section 209A(1) or Section 209A(1)(b) or Section 209A(4) or Seciton 212(3A) and he fails to furnish such statement/estimate , he exposes himself to penalty under Section 273 (1) (b) or 273(2)(b) or 273(2)(c) , as the case may be . If, on the other hand, he furnishes a statement/estimate but he does not pay, he becomes an assessee in default under the pre-1988 section 218(1) and the consequences thereof , including penalty under Sec. 221, but not under Sec. 273(1)(b) or 272(2)(b) or 273 (2)(c). However, if the statement/estimate is found to be knowingly untrue, penalty under Sec. 273(1)(a) or 273 (2)(a) or 273 (2)(aa) may be imposed. [Cyriac Mathai vs C.I.T. ITR.No. 91 OF 1997. Dated 29-10-1999.Arijit Pasayat (CJ) & K.S.Radhakrishnan(J)]

Sec. 186 - Failure to file returns on time. Not responded to notices under Secs. 139(2) and 142(1). Best judgment assessment was made and the registration granted to the firm was cancelled. No interference is necessary. [ Hotel Shah & Co. vs Asst.Commissioner of Income Tax. [1999]105 Taxman 444 (Kerala). A.S.Venkitachala Moorthy{J}]

Sec.230-A- Tax clearance certificate - Application for obtaining the same can be filed only by the transferor and not by the transferee. Court held that application made by the transferee rightly rejected. [ K.A.Sudheesh Vs. Deputy Commissioner of Income Tax. (1999)154 CTR (Ker) 482 A.S.Venkitachala Moorthy{J}]

Sec. 234 A - Liability for interest is attracted automatically by operation of law without further requirement of any order to that effect. The order made merely quantifies the amount of interest. However, Income-Tax Officer is empowered to reduce or even waive interest at the instance of the assessee, if good cause is shown for the same by it. It is therefore , obvious that no prior show cause notice is required to be given to assessee since liability to pay interest is attracted automatically by operation of law, but the rigour thereofn is mitigated by empowering Income Tax Officer to reduce or even waive amount, if good cause shown by assessee after incurring that liability. As the levy is automatic, question of granting opportunity of having a say in the matter does not arise. Chief Commissioners and Directors-Generals (Investigation) are empowered to reduce or waive penal interestfor late functioning of return of income, non-payment of inadequate payment of advance tax,etc. [C.I.T. vs M/s. R.Ramalingair. ITR.No. 132 of 1997. Dated 22-10-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 249 - Amendment with effect from 1-4-1989 - Requiring payment of tax admitted to be due as a condition precedent for enteraining appeal continues to exist and the old law which created that right of appeal must also exist. [CIT vs Kerala Transport Co. 2001(1) KLT SN.29.P.27. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 256(2) - Income .Tax .Appellate .Tribunal .has right in cancelling the rectification orders issued by the assessing authority [ CIT vs South Indian Bank Litd . 1999 KLJ (Tax Cases) 76 .P.A.Mohammed , P.Shanmugham & G.Sivarajan (J&J).]

Sec. 260(1) Once an answer is given to a reference, the disposal of the appeal will depend upon that reference. A person cannot ask the Commissioner of Income Tax to delete the decision of the High Court on the basis of which a reference has been disposed of by another decision is the correct proposition of law. A High Court which determines the questions referred under Sec.256 does not act as Civil Court so as to attract the provisions of C. P.C.[M/s. Sasidhara Shenoy and others vs The Deputy Commr of Income-Tax and others. O.P.No. 4134 of 1999, Dated 25-9-1999.S.Sankarasubban {J}}

Sec. 269 UD - Pre-emptive purchase - It is not in every case that pre-emptive purchase is to be done. It has to be ordered when there is deliberate undervaluation of property. [Musthafa Ummer v. Appropriate Authority. 2001(1) KLT 555. M.Ramachandran]

Sec.269 UD(1) - Ordering pre-emptive purchase of property - The order to be passed under this section will have far reaching consequence as far as the petitioner is concerned. The materials on which appropriate authority has based its conclusion have therefore necessarily to be supplied to the petitioners. Opportunity of being heard must be adequate and effective and shall not be an empty formality. Arbitrariness which results from non-observance of the principles of natural justice leads to infringement of Art.14 of the Constitution of India and any act which is repugnant to the said provision is null and void. [ Musthafa Ummer and another Vs. Appropriate Authority Income Tax Department and others, 2002 (1) KLT 199. . (K.S.Radhakrishnan & K.Balasubramanyan (JJ)]

Sec. 271(1)(c) - Blameworthiness attached to the assessee with reference to the original return cannot be avoided by filing a fresh return after concealment was detected by the assessing authority. A return filed in response to notice under Sec. 148 is not to be treated at par or compared as a revised return. Filing of return including the agreed concealed income does not consititute a mitigating circumstance and penalty has been rightly levied. [ PC.Joseph Brothers vs C.I.T . ITR Nos. 45 to 48 of 1997. 15-10-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan(J)

Sec. 271 (1) (c) Burden to explain the alleged concealment is on the Assessee - Contention that Assessee that he has received money from his father-in-law from abroad - No supporting material - Money from abroad can come only through bank - Penalty sustained [The Deputy Commissioner of Income Tax vs K.Suresh Kumar. 2001 (3) KLT SN 107, Page 84.. P.K.Balasubramanyan & C.N.Ramachandran Nair (JJ)]

Sec. 271 (1) (c) - Penalty - Second return filed by the assessee could not be considered as a revised return under Sec. 139(5) as same was filed after department had started making enquiries and that mere fact that additional income offered by assessee was accepted would not absolve the asessee of liability for penalty. It was for the assessee to show that it was unaware of what was happening and for Revenue to show that it was aware. Revised return was filed to as an attempt to plug loopholes after detection and it was not intended to bring on record materials which were discovered subsequent to filing of the return. [ C.I.T vs . A.Sreenivasa Pai. ITR.No. 137 of 1996. Dated 1-11-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 271B - Return filed under the " amnesty scheme" and on assessment on the basis of the same, there is no scope for initiation of penalty proceedings and/or levy of penalty. Circulars issued made clear that the intention was to give immunity from penal proceedings of all nature. [C.I.T vs M/s. Maulana Tea Co .ITR.No. 3 of 1997. Dated 9-11-1999. Arijit Pasayat (CJ) & K.S.Radhakrishnan (J)]

Sec. 271 (1) (c) - Assessment order passed on 4-6-1979 -Appeal disposed of on 24-03-1980 -Notice issued to re-open on 27-11-1981 - Fresh return filed on 02-1-1982 Fresh order passed on 21-2-1986 - Notice issued for initiating penalty proceedings 21-2-1986 Penalty order passed on 24-03-1998 - Not barred by limitation. [ K.Nalini vs C.I.T. 2001 (3) KLT 485 . S.Sankarasubban & S.Marimuthu (JJ)]