Section 140

Section 140 — the law in short

What the courts have decided on section 140, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Vipul Aggarwal v ITO High CourtHelps taxpayerNo later treatment found
  The sanction for prosecution names the company as the assessee. Can the complaint proceed against me as its director?
  No. The Delhi High Court quashed the complaint against the director because the sanction placed on record identified only the company; there was no sanction against him, whether as a person, as a director, or as someone responsible for the conduct of the company's business. Without that sanction the department cannot proceed against him for the s.276CC offence.
• ACIT v Prime Securities Ltd ITATHelps taxpayerNo later treatment found
  The return was signed by the company secretary instead of a director. Is it a nullity, or a defect you can cure?
  A defect you can cure - decided on the preponderance of judicial opinion. The Tribunal recorded that the issue is one on which more than one view is possible but that the preponderance of judicial opinion is more in favour of the assessee, and directed that the assessee be treated as having filed a defective return on 31 December 1991 which was cured on 15 October 1992, so that the return stands as filed on the original date. A return signed by a person not authorised by s.140 is treated as a curable defect within s.139(9) read with s.292B rather than as a nullity.
• JCIT v Tata Cummins Ltd ITATHelps taxpayerNo later treatment found
  The officer's order under s.139(9) says your return is invalid and that you are not entitled to carry forward the loss. Can he decide that in a s.139(9) order?
  No. The Tribunal held that an order under s.139(9) can be made only to determine whether there was a defect in the return and whether it was rectified. An officer who goes on to rule on entitlement to carry forward the loss has made an assessment order, with the consequence that it is appealable. On the facts the Tribunal also held that the acknowledgement sheet is not part of the return prescribed under Rule 12, and that a signature defect, once removed, relates back to the date the return was originally filed.
• Statutory position — Rule 8AB and section 48(iii): how the section 45(4) amount is set off when the firm later sells the asset CBDT Circulars & InstructionsCuts both ways
  My firm paid capital gains tax under the substituted section 45(4) on the money we paid a partner on reconstitution. When the firm later sells the land that was revalued, can it deduct that already-taxed amount from the sale consideration?
  Only if the section 45(4) charge arose out of a revaluation of a capital asset or the valuation of a self-generated asset or self-generated goodwill, and only through Rule 8AB. Section 48(iii) allows the firm to deduct so much of the section 45(4) amount as is attributable to the capital asset being transferred, 'calculated in the prescribed manner', and the prescribed manner is Rule 8AB: the amount is spread over the assets in the same proportion as the increase in the value of each asset on revaluation bears to the total increase, and the attribution must be reported in Form 5C by the section 139(1) due date.
• Statutory position — the substituted section 45(4): the firm is taxed on what a partner takes out above his capital account CBDT Circulars & InstructionsCuts both ways
  A partner retired and we paid him Rs 2 crore, most of it out of a revaluation of the firm's land. He says it is his own capital. Is the FIRM taxable?
  Yes, on the excess. The substituted s.45(4) charges the FIRM to capital gains on money or a capital asset (or both) received by a partner in connection with a reconstitution, to the extent it exceeds the balance in his capital account — and that balance must be computed WITHOUT the increase caused by revaluation of any asset or by self-generated goodwill or any other self-generated asset. The formula is A = B + C − D, and if A is negative it is deemed to be zero, so a loss cannot be thrown up. Substituted by the Finance Act 2021 with effect from 1 April 2021, i.e. AY 2021-22.
• Statutory position — s.15 of the Black Money Act and rule 6(4) of the Black Money Rules, 2015: what may be appealed to the Commissioner (Appeals), the thirty-day period and the one-year limit on condonation, and the rule that bars admission of the appeal unless the tax with penalty and interest on the undisputed liability has been paid CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  I want to appeal a Black Money Act assessment to the Commissioner (Appeals). Is there a pre-deposit, and if so on what amount — the whole demand or only the part I am not disputing?
  On the part not objected to. Rule 6(4) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015, notified by G.S.R. 529(E) dated 2 July 2015, reads: "No appeal under sub-section (1) of section 15 shall be admitted unless at the time of filing of the appeal the assessee has paid the tax alongwith penalty and interest thereon on the amount of liability which has not been objected to by the assessee." The condition is on admission, it bites at the time of filing, and it is measured by the liability not objected to — not by the whole demand. The same rule provides that the appeal is made in Form 2 (rule 6(1)), that the form, grounds and verification are signed and verified by the person authorised to sign the return of income under s.140 of the Income-tax Act (rule 6(2)), and that the appeal is accompanied by a fee of ten thousand rupees (rule 6(3)). Section 15(1) gives the right of appeal to any person objecting to the amount of tax on undisclosed foreign income and asset for which he is assessed, denying his liability to be assessed under the Act, objecting to any penalty imposed by the Assessing Officer, objecting to an order of rectification having the effect of enhancing the assessment or reducing the refund, or objecting to an order refusing to allow a claim for rectification under s.12. Section 15(3) requires the appeal to be presented within thirty days from the date of service of the notice of demand relating to the assessment or penalty, or from the date on which intimation of the order appealed against is served in any other case. Section 15(4) allows the Commissioner (Appeals) to admit a late appeal where he is satisfied that the appellant had sufficient cause for not presenting it in time and the delay does not exceed one year. Section 15(5) requires him to hear and determine the appeal and pass such orders as he thinks fit, with a proviso that an order enhancing the assessment or penalty shall not be made unless the assessee has been given a reasonable opportunity.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.