Of the three years, the CIT granted stay for two years and directed the AO to realize the demand for AY 2010-11 amounting to Rs. 7.69 crores. No reasons were given for the decision. Despite the stay granted by the CIT, the AO issued garnishee notices u/s 226 (3) for the entire amount of Rs. 59.06 crores. The assessee filed a writ petition to challenge the same. HELD allowing the Petition:

assessee therefore, cannot be subjected to the exercise of the jurisdiction under s. 263. Therefore, the Tribunal was not justified in upholding the order of the CIT, passed under s. 263, directing the AO to include the sum of Rs. 1,75,32,600 in the total income of the assessee under s. 41(1), in the previous year, relevant to asst. yr. 1982-83, on the ground that there had been complete cessation of the liability during that period.

Thus, the view taken by AO cannot be said to be erroneous which will render the assessment order as erroneous. Neither the AO has drawn incorrect assumption of facts nor AO has rendered incorrect application of law when he accepted the claim of the assessee that advertisement and publicity expenses were allowable as business expenditure. When an order cannot be said to be erroneous then it cannot be prejudicial to the interests of Revenue as lawful loss of revenue only can cause prejudice to the Revenue.

Under s. 158BB, the procedure for computing the undisclosed income of the block period has been given. It provides that the undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of this Act, on the basis of evidence found as the result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence with certain other conditions.

S. 10(23C)(vi) provides that the income of any university or other educational institution existing solely for educational purposes and not for purposes of profit shall be exempt. The assessee was running a school solely for educational purposes and claimed exemption u/s 10 (23C) (vi).

One Bench of the Tribunal decided an appeal in favour of the assessee. However, another Bench refused to follow that decision even though the facts were the same on the ground that the earlier decision did not address the grievance of the Revenue and did not consider all the facts and did not lay down a clear ratio. The assessee filed a writ petition complaining of breach of propriety on the part of the Tribunal by not referring the issue to a larger Bench. HELD upholding the challenge:

In a judgement that will clear the air on the tricky issue of the income-tax department’s power to levy penalties on assessees, the Supreme Court has held that a penalty cannot be levied merely because the I-T authorities and taxpayers hold divergent views on calculation of income.

Income of foreign institutional investors (FIIs) from derivatives trading will not be liable to tax in India, the Authority for Advance Rulings has said, clearing the air on taxability of the income of foreign investors trading in Indian securities.

In pursuance of the consultations of the collegium of the I.T.A.T consisting of the President and two senior-most Vice Presidents, the following Members of the Income-tax Appellate Tribunal have been transferred, in public interest, in the same capacity, to the Bench(es) of the Income-tax Appellate Tribunal as shown against their names, with effect from the forenoon of 05.04.2010

The assessee claimed deduction u/s 36 (1) (iii) for interest paid on loan taken for purchase of shares. The interest was disallowed u/s 14A. Penalty u/s 271 (1) (c) was levied on the ground that the claim was unsustainable which was deleted by the lower authorities.