Direct Tax Cases Weekly Round-Up: 09 To 15 June 2024

Unsettled Claims As Well As IBNR Would Amount To Contingent Liabilities; Section 37 Deduction Allowable: Delhi High Court

Case Title: Principal Commissioner Of Income Tax 1 Versus M/S Care Health Insurance Limited

Citation: 2024 LiveLaw (Del) 707

The Delhi High Court has held that the deduction under Section 37 of the Income Tax Act is allowable on unsettled claims as well as Incurred But Not Reported (IBNR), which would amount to contingent liabilities.

Reassessment On Non-Searched Entity Is Governed By Limitation In First Proviso To Sec 149(1) R/w Sec 153C & 153A: Delhi High Court

Case Title: Dinesh Jindal Vs ACIT and Ors

While quashing the reassessment notice issued to the Assessee, pursuant to a search operation conducted against a third party, the Delhi High Court held the same to be barred by limitation under first proviso to Section 149(1) read with Section 153C & Section 153A of Income tax Act.

Non-Payment Of Tax Due To Uncertain Legal Position Existing At Time Of Filing Return Is Outside Scope Of 'Mis-Reporting': Delhi HC Deletes Penalty U/s 270A

Case Title: GE Capital Us Holdings Inc Vs DCIT

While quashing a show cause notice issued by the Department for initiation of penalty proceedings u/s 270A in a vague manner, the Delhi High Court held that categorical finding of 'mis-reporting/ under-reporting' is essential for levy of penalty u/s 270A.

Provisions For Unsettled Outstanding & IBNR Claims Allowable U/s 37 Being Ascertained Liabilities: Delhi High Court

Case Title: PCIT Vs Care Health Insurance Limited

While upholding ITAT's decision deleting disallowance of provisions for unsettled outstanding claims and 'Incurred But Not Reported' (IBNR) claims of health insurance company, the Delhi High Court held that provisions for unsettled outstanding and IBNR claims are not contingent liabilities, and hence allowable u/s 37 of Income tax Act.

Calcutta High Court

AO's Failure To Make Proper Enquiry On Bogus Claim Of LTCG By Sale Of Shares; Calcutta High Court Upholds Revision Order

Case Title: Principal Commissioner Of Income Tax-9, Kolkata Vs. Bina Gupta

The Calcutta High Court has upheld the revision order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, as the AO failed to make a proper inquiry on the bogus claim of long-term capital gain (LTCG) by the sale of shares.

Punjab & Haryana High Court

Auction By Based On Non-Existent Order; Punjab & Haryana High Court Imposes Cost On Income Tax Authorities

Case Title: M/s Gokal Chand Rattan Chand Versus UOI

The Punjab and Haryana High Court has held that the auction proceedings based on a quashed ex-parte income tax appellate tribunal (ITAT) order by the tax recovery officer are void ab initio.

Telangana High Court

Colourable Devices To Evade Tax Can't Be Tax Planning, Rules Telangana High Court

Case Title: Ayodhya Rami Reddy Alla Versus Principal Commissioner of Incometax Central

The Telangana High Court has held that tax planning may be legitimate, provided it is within the framework of the law. Colorable devices cannot be part of tax planning, and it is wrong to encourage or entertain the belief that it is honorable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges.

Rajasthan High Court

Unreasoned Orders By Judicial/ Quasi-Judicial Authorities Violate Natural Justice: Rajasthan High Court Quashes Commercial Tax Assessment Order

Title: M/s Napin Impex Pvt. Ltd. v Commissioner, Commercial Taxes Department, Kar Bhawan, Ambedkar Circle, Janpath, Jaipur

The Rajasthan High Court has set aside an assessment order passed by the Commissioner, Commercial Taxes Department, Jaipur (“CCT”) under the Rajasthan Value Added Tax Act, 2003. The Court observed that the assessment order was unreasoned and was passed without any application of mind, violating the principles of natural justice.