The Chartered Accountant

LEGAL UPDATE
C.I.T., 1995 (127) CTR (Bom) 395 and held that since
the returns filed by the assessee on 13/3/1992 were
regularised subsequent to issue of notice under Section
148, the precondition of disclosure of income before
issue of notice under Section 273A was not fulfilled
and thereby not gone into the merits of matter. But
the Commissioner failed to consider that in that case
returns for three years were true and complete out of
eight years returns and therefore, the court refused to
interfere with the said order. However, in the instant
case the Commissioner, wrongly overlooked the judgment
passed in B.R.Sound-N-Music vs. O.P.Bhardwaj
and another 1988 (173) ITR 433 passed by this court
against which the Special Leave Petition was dismissed
by the Supreme Court. In B.R.Sound-N-Music’s case
(supra) it is specifically observed that Section 273A(1)
(a) requires a disclosure of full and true income and
not the filing of valid returns in time before issue of
notice under Section 139(2) or Section 148. It is necessary
for the commissioner to take into consideration
all the material available on the record.
Hence, the order passed by the Commissioner was
quashed and set aside.
Section 37(1) read with Section 145 of the Income-tax Act, 1961 – Business Expenditure – In which year it is
allowable [Assessment Year 1998-1999]
Allowability of the sum provided under the head “salaries and wages”, pending revision
Central Government Employees Consumer Cooperative Society Limited v. Commissioner of Income Tax
(Delhi), 19 September, 2008
The assessee had provided for a sum under the head
“salaries and wages”, pending revision. The Assessing
Officer found that the liability had been provided
for in relation to wage revision implemented with effect
from 01.07.1997. But, the liability on account of
wage revision had not been ascertained and had not
accrued during the year which ended on 31.03.1998.
The Assessing Officer disallowed it for the assessment
year 1998-1999. The assessee placing reliance
on Accounting Standard 4 issued by the Institute of
Chartered Accountants of India contended that note
of significant events occurring after the balance sheet
date was required to be taken.
The High Court observed that although the Tribunal
took the view that no notification had been issued by
the Central Government indicating the approval to
Accounting Standard 4 in terms of Section 145(2),
the Tribunal discussed the applicability of Accounting
Standard 4 itself and concluded that the same
was not, in any event, applicable in the facts of the
present case. On facts, the Tribunal observed that in
the case of the assessee the condition existing on the
balance sheet date, i.e., on 31.03.1998 was, at best,
the revision of pay being contemplated with effect
from 01.07.1999. The Tribunal further observed that
there was no indication of any revision of the pay
scales payable by the assessee for the year 01.07.1997
to 31.03.1998. Consequently, the Tribunal returned
a finding of fact that the liability itself had been incurred
by the assessee only during the financial year
1998-1999. The High Court therefore held that the
decision arrived by the Tribunal was correct in law.
The appeal was dismissed.
Section 273 read with Section 215 of the Income-tax Act, 1961— Penalty – False estimate of, or failure to pay,
advance tax [Assessment Year 1979-80 and 1980-81]
For imposing penalty, mens rea on the part of assessee would have to be shown
Commissioner of Income Tax, Ahmedabad v. Sarabhai Holdings Pvt. Ltd (Supreme Court), 21 October, 2008
The assessee followed the Mercantile System of Accounting.
There was an agreement whereby the assessee
agreed to transfer its industrial undertaking
and business activity in favour of the assessee’s own
subsidiary X. The agreement provided for an interest
clause, which was agreed at the rate of 11% per
annum and that it would be payable on balance sale
consideration which would remain unpaid from time
to time. X transferred the undertaking to Y and wrote
a letter on 15.6.1978 to the assessee proposing modification
in terms of payment and requested, inter alia,
that the interest be charged on deferred sale consideration
from 1.7.1979 instead of 1.3.1977. Accordingly,
a Resolution dated 30.6.1978 was passed, doing away
with the requirement of payment of interest. The assessee
claimed waiving of interest as a natural corollary
of the Resolution dated 30.6.1978. However, the
assessee was asked to pay advance tax. The assessee
filed an estimate, showing nil amount of advance tax
payable. The Assessing Officer levied interest under
Section 215 on a finding that the assessee had failed to
pay advance tax. The Assessing Officer also directed
THE CHARTERED ACCOUNTANT 999 DECEMBER 2008