TOP NEWS

5% GST on catering in railway stations & trains

DIT SYSTEMS

Notification 04

Procedure for registration and submission of Statement of Reportable Account as per section 285BA of Income-tax Act, 1961 read with Rule 114G of Income-tax Rules, 1962

Notification 03

Procedure for registration and submission of statement of financial transactions (SFT) as per section 285BA of Income-tax Act, 1961 read with Rule 114E of Income-tax Rules, 1962

Notification 02

Procedure for registration and submission of Form No. 61 as per Rule 114D of Income-tax Rules, 1962

Notification 01

Procedure for submission of Form No. 60 by any person who does not have a Permanent Account Number and who enters into any transaction specified in Rule 114B of the Income-tax Rules, 1962

CASE LAWS

2018-TIOL-630-HC-MUM-IT + Story

PR CIT Vs KARIM KAMRUDDIN MALIK: BOMBAY HIGH COURT (Dated: March 26, 2018)

Income tax - Section 271(1)(c)

Keywords - Defective show cause notice - Levy of penalty - Oral admission.

The Revenue Department preferred the present appeal challenging the action of ITAT in entertaining a ground by an oral submission without there being any specific ground raised before it and without any defence, submission and pleadings made by the assessee at the first instance before AO, or before the CIT(A) with regard to his contention of defective show cause notice issued by the AO for penalty u/s 271(1)(c).

On appeal, the HC held that,

Whether assessee deserves any relief from penalty only on basis of oral submission, when no defence is made either before AO or FAA regarding any defect or non application of mind for levying penalty - NO: HC

++ the question to be answered by this Court is only about the propriety on the part of and power with the ITAT to examine the ground raised before it orally for the first time. The judgment of the Apex Court in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income Tax, shows that there assessee forwarded a letter and sought to raise additional grounds. The ITAT framed five questions while making reference to the Apex Court but did not examine additional grounds raised by the assessee on merits. The Apex Court therein observed that assessee should not be prevented from raising a question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item, and therefore, there is no reason to restrict the power of the Tribunal u/s 254 only to decide the grounds which arise from the order of the CIT(A);

++ coming to the present case, a perusal of the appeal memo shows that the attempt of Department is to demonstrate incomplete consideration or then non application of mind. It is claimed that the assessee, after service of notice u/s 271(1)(c) upon him, never objected to it alleging non application of mind by the AO and did not raise any question, going to its root, at the earliest or even before the CIT(A). Even before ITAT while opposing the order, no such effort was made and orally the contentions based upon omission to strike down some part or portion in notice, not applicable in the matter, were raised. Thus, the fact that such an objection which should have been raised at the earliest, was not raised before the AO imposing penalty or then before CIT (A) or then in appeal memo, is lost sight of. The impact of failure to raise it 'so', is also not evaluated;

++ the question whether such a ground needed to be taken at the first available opportunity, the impact of failure to so raise it, therefore, need to be answered in present matter. The perusal of order passed by ITAT does not show consideration of this aspect. The other contentions which pertain to merits of the matter, therefore, need not be gone into and cannot be gone into by this Court in present appeal. In present facts, when the ITAT has not looked into the effect of omission to raise such a contention at the first available opportunity, this Court is inclined to answer the question in favour of the Revenue. Accordingly, the impugned order is quashed.

Revenue's appeal allowed

2018-TIOL-629-HC-MUM-IT

PR CIT Vs GEE SQUARE EXPORTS: BOMBAY HIGH COURT (Dated: March 13, 2018)

Income Tax - Sections 40A(3), 119 & Rule 6DD - CBDT Circular No.8 of 2016.

Keywords - Cash payments - Certificate from veterinary doctor - Producer of meat & Restrictions under Board's Circular.

The assessee-partnership firm, engaged in the business of exporting frozen buffalo meat and veal meat to countries like Oman, Kuwait and Vietnam. The assessee had purchased raw meat from various farmers and after processing and packaging in cartoons, exported the same. However, it had in the course of these activities, made its purchases of meat in cash in excess of Rs.20,000/-. The Authorities therefore, disallowed payments made in cash for purchases of meat in excess of Rs.20,000/- i.e. Rs.26.79 crores in the aggregate u/s 40A(3), on the ground that they were not eligible for benefit of CBDT Circular No.8 of 2016, wherein one of the conditions for grant of benefit of Rule 6DD was certification from a Veterinary Doctor certifying that the person certified in the certificate was a producer of meat and slaughtering was done under his supervision.

On appeal, the Tribunal held that as per Sec. 40A(3), no disallowance could be made if the payment in cash was made in the manner prescribed under Rule 6DD. The Tribunal further opined that the scope of Rule 6DD could not be restricted by the CBDT Circular No.8 of 2016.

On appeal, the HC held that,

Whether a CBDT circular can impose additional condition upon a taxpayer which is against the scope & mandate as prescribed by under the provisions of Income tax Act & Rules - NO: HC

++ the basis of the Revenue seeking to deny the benefit of the proviso to Sec. 40A(3) and Rule 6DD(e), is non satisfaction of the condition provided in CBDT Circular No.8 of 2016. In particular, non furnishing of a Certificate from a Veterinary Doctor. The proviso to Sec. 40A(3) seeks to exclude certain categories / classes of payments from its net in circumstances as prescribed. Section 2(33) defines “prescribed” means prescribed by the Rules. It does not include CBDT Circulars. It is a settled position in law that a Circular issued by the CBDT cannot impose additional condition to the Act and / or Rules adverse to an assessee. In the case of UCO Bank Vs. CIT, the Apex Court has observed “Also a circular cannot impose on the taxpayer a burden higher than what the Act itself, on a true interpretation, envisages”. Thus, the view of the Tribunal that the CBDT Circular cannot put in new conditions for grant of benefit which are not provided either in the Act or in the Rules framed thereunder, cannot be faulted. More particularly, so as to deprive the assessee of the benefit to which it is otherwise entitled to under the statutory provisions. Therefore, the assessee having satisfied the requirements under Rule 6DD, cannot, to that extent, be subjected to disallowance u/s 40A(3).

Revenue's appeal dismissed

2018-TIOL-628-HC-MAD-IT + Story

KALANITHI MARAN Vs UoI: MADRAS HIGH COURT (Dated: March 28, 2018)

Income Tax - Writ - Sections 2(35), 276B & 278.

Keywords: Criminal proceeding - Principal officer - Remuneration from company - Sitting fees - TDS arrears.

The Assessee, an individual, is a Non-Executive Chairman of the Sun Group and he owns television channels, newspapers, weeklies, FM radio stations, DTH services and a movie production house. During the relevant year, a survey operation was conducted by the Revenue, wherein statement of Chief Financial Officer of the company, namely Mr.R.Neelakantan was recorded, in which he stated that one Mr.Manish Jain, Assistant Manager (Taxation) was responsible for TDS. Accordingly, the ACIT issued SCN to the Assessee at his Chennai residence and to one Mr.Rakesh Kumar, DGM (Finance & Taxation) at IGI Airport, Delhi. In reply, the Assessee stated that the Managing Director, CFO and COO were involved in the day-to-day affairs of the company. Accordingly, the ACIT had issued a SCN to the Managing Director, namely, Mr.K.Natrajhen mentioning that the reply sent by the Assessee stated that the company was professionally run by the Managing Director, who was in-charge of the day-to-day affairs of the company. Further, the ACIT also informed the Managing Director that prosecution u/s 276B would be taken against him. In reponse, the Managing Director stated that the Assessee was only a Non-Executive Director in the company and was not involved with the day-to-day management of the company and had not made any visits to the company. Further, the Managing Director, also stated that the Assessee was not at all responsible for the administration and the management of the company and he did not drew any salary or remuneration, and attended the board meetings only in the Non-Executive capacity. Therefore, the Managing Director had urged that the order issued against the Chairman holding him to be the Principal Officer within the meaning of Section 2(35) deserves to be recalled.

On Writ, the HC held that,

Whether as per Article 226(2) of the Constitution of India, the HC can entertain a Writ petition challenging even when no part of cause of action had arisen either wholly or partly within the territorial jurisdiction of assessee's residence or company's registered office - YES: ITAT

Whether a Non-Executive Chairman of the BoD of the company can be treated as Principal Officer within the meaning of Sec. 2(35) merely by considering an allegation that he is incharge of the conduct of the same company - NO: HC

Whether a Non-Executive Chairman can be booked u/s 278 for an offence committed by the company, without establishing a prima facie case against his liability and obligation as Principal Officer in the company's day-to-day affairs - NO: HC

++ admittedly, the order in dispute was served on the Assessee at his residential address at Chennai. Though the authority is at Delhi, it is clear that part of cause of action had arisen at Chennai. As per Article 226(2) of the Constitution of India, the writ petition is maintainable before a High Court within which the cause of action wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories. That apart, though the company's registered corporate office is at Delhi and the TAN number is at Delhi assessment, the Assessee in this writ petition has not challenged the assessment order, but, has challenged only the order naming him as the Principal Officer. In these circumstances, this Court has jurisdiction to entertain the writ petition;

++ the provision of Section 278B clearly states that it shall not render any such person liable to any punishment, if he proves that offence was committed without his knowledge. The ACIT has not produced any material to establish that the Assessee was responsible for the day-to-day affairs of the company. In the absence of any material, the ACIT should not have come to the conclusion that the Assessee is the Principal Officer. The reasoning given by the ACIT are without any materials to substantiate the same. Unless the ACIT make out a prima facie case against the Assessee of his liability and obligation as Principal Officer in the day-to-day affairs of the company as Chairman-cum-Director of the company, u/s 278B, the Assessee could not be prosecuted for the offence committed by the company. In the absence of any material, the SCN itself, prima facie disclosing the Assessee's responsibility for the running of the day-to-day affairs of the company process, could not have been issued against him. The Assessee cannot be made to undergo the ordeal of a trial unless it could be prima facie disputed that he was legally liable for the failure of the company in paying the amount deducted to the credit of the company. A mere allegation that the Assessee is incharge of the conduct of the company is not sufficient to hold that the Assessee is the Principal Officer;

++ the Managing Director, viz., Mr.K.Natrajhen, himself has stated that he is responsible for the day-to-day affairs of the company. That apart, a SCN was also issued to the Managing Director by the ACIT. The Chief Financial Officer of the company, viz., Mr.R. Neelakantan has also stated that one Mr. Manish Jain, Assistant Manager (Taxation) is responsible for the TDS. Further, to the SCN sent to Mr.Rakesh Kumar, Deputy General Manager (Finance & Taxation), the company has sent a detailed reply wherein the company has stated that the said Rakesh Kumar should not be treated as the Principal Officer, which was accepted by the ACIT and the said Rakesh Kumar was not named as the Principal Officer. On the contrary, even without any materials and also not considering the stand taken by the Managing Director and also the Chief Financial Officer of the Company, the ACIT arrayed the Assessee as the Principal officer. The ACIT has not given any reason for rejecting the stand of the Managing Director and the Chief Financial Officer of the company. There was a meeting between the company officials and the Revenue in order to facilitate to pay the TDS on a payment plan basis and the company has submitted its plan and the said plan was accepted by the ACIT. Thereafter, the company has also made payments towards TDS and it is informed to this Court by the Counsel for the Assessee that the company had paid the entire arrears of TDS and as on date, there are no TDS arrears payable by the company;

++ though the Assessee and his company were holding more than 50% shares, in the absence of any material to establish that the Assessee was in charge of the day-to-day affairs, management, and administration of the company, the ACIT should not have named him as the Principal Officer. The main criteria treating a person as the Principal Officer is he should have been in charge of the management, administration and day-to-day affairs of the company. It was also stated by the Managing Director that the Assessee is only a Non-Executive Director in the company, who is based at Chennai and is not involved with the day-to-day management of the company and has not made any visits to the company till date as he does not draw any salary or remuneration from the company and attends the Board Meetings only in the Non-Executive capacity, for which, he does not even get any sitting fees. Hence, it is clear that the Assessee was not involved in the management, administration and the day-to-day affairs of the company, therefore, the Assessee cannot be treated as Principal Officer.

Assessee's petition allowed

2018-TIOL-627-HC-MUM-IT + Story

SHRI SAIBABA SANSTHAN TRUST (SHIRDI) Vs UoI: BOMBAY HIGH COURT (Dated: March 27, 2018)

Income Tax - Writ - Sections 143(3), 220(6) & 246A.

Keywords - Alternative remedy - Appellate powers - Efficacious remedy - Final hearing - Incorrect dates & Stay application.

The Assessee-trust, devoted towards development of Shirdi village, had preferred the present petition challenging the method and the procedure adopted by CIT(A) in dealing with the Assessee's appeal filed u/s 246A. The said appeal was filed from the order dated 31st December, 2017 of the DCIT(E), in respect of AY 2015-16. The Assessee contended that the CIT(A) after having finally heard the Assessee on the merits of its appeal, instead of disposing of the appeal, sought to set the clock back and pass an order on the Assessee's stay application. The said action on the part of the CIT(A) was without any basis in law, particularly, in the absence of any statutory requirement under the Act, of the tax demanded being paid or pre-deposited before the appeal could be entertained or considered on merits.

On Writ, the HC held that,

Whether commencement of final hearing of appeal by CIT(A) will prevent him from taking up the stay application and passing an order thereon - YES: HC

Whether stay application preferred before CIT(A) will be rendered infructuous, once the hearing on the appeal relating to same matter is disposed of by CIT(A) himself - YES: HC

Whether the CIT(A) is empowered to grant stay of demand arising consequent to the order in appeal before him - NO: HC

Whether the power to stay a demand is bestowed upon the AO u/s 220(6) by not treating the Assessee in default, where an appeal is awaiting final disposal before the CIT(A) - YES: HC

++ the allegations with regard to the CIT(A) mentioning of incorrect dates in the order sheet and the office of the CIT[E] threatening to attach the Assessee's bank account and reopen assessments for the last two years in case it fails to deposit the amount of Rs. 20 Crores before 31st March, 2018, is, indeed very serious, particularly, when the AO/CIT[E] could have dealt with the request of deposit by passing an order on the application u/s 220(6) filed by the Assessee. In the absence of denial on affidavit by the CIT(A) and CIT[E], the allegations in the petition cannot be discarded. Although in effect, the Counsel for the Revenue has disputed the allegations by stating that if the date was wrongly mentioned there was no compulsion to sign the same. This Court could have asked for a response from the CIT(A) and CIT[E] to the allegations in the petition. However, it would be best if the CBDT carry out the necessary investigation on the said allegations and if there is truth in it, it would take corrective action on the same. This is particularly because this conduct alleged on the part of the CIT(A) and the office of the CIT[E] appears to be an aberration, as normally this Court have noted that the officers Revenue do administer the Act with fairness and with loyalty to the Act. Therefore, if the allegation in the petition are correct, then such failures on the part of its Officers needs to be corrected by the CBDT before it becomes the norm;

++ in terms of Sec. 246A any person aggrieved by an order passed in regular assessment proceedings u/s 143(3), is entitled to challenge it before the CIT(A). This challenge in appeal is not circumscribed by any requirement to predeposit and/or paying the amounts demanded, as a consequence of the order. Therefore, the CIT(A) is obliged to entertain and dispose of the appeal before him on merits without any regard to the fact that the amounts demanded have been paid/deposited or not paid/deposited by the Assessee before him. Admittedly no order u/s 220(6) has been passed by the AO or by the CIT[E]. There is no power bestowed upon the CIT(A) under the Act to stay the demand arising consequent to the order in appeal before him. In fact the power to stay such a demand has been bestowed upon the AO u/s 220(6) by not treating the Assessee in default where an appeal is awaiting final disposal before the CIT(A) on such conditions as the facts and circumstances of the case may warrant. Nevertheless, the CIT(A) as an appellate authority, has inherent powers of an Appellate Authority to do all things necessary to make the appellate powers effective. This would includes a power to stay the effect of the said order before the appellate authority till the disposal of the appeal before it. However, this necessity of exercising inherent power of staying the order challenged before the appellate authority comes to an end, when the appellant has been heard finally on merits of its appeal;

++ the Assessee had filed an appeal to the CIT(A) in addition to an application for stay seeking exercise of inherent powers of the CIT(A), as the order was contrary to the binding decisions of the Tribunal. In response, the Assessee received a communication from the office of CIT(A) that the hearing of the appeal is fixed. Consequent to the same, the Assessee attended the hearing and made submission and at the conclusion of hearing, an order sheet was also signed indicating that the hearing of the appeal was completed. However, inspite of the conclusion of hearing of the appeal, the CIT(A) sought to hear the Assessee on its stay application leading to a conditional stay on certain amounts being paid to the Revenue. Once the hearing on the appeal is concluded, then the stay application as filed becomes infructuous as the appeal itself would stand disposed of by an appropriate order of the CIT(A). The submission on behalf of the Revenue that mere commencement of final hearing of the appeal by the CIT(A) will not prevent him from taking up the stay application and passing an order thereon is in the present facts without merit. In the present facts, it is only the case of application of law and no factual investigation is felt necessary by the CIT(A) which would justify his taking up the stay application for hearing after having concluded the hearing on the merits of the Assessee's appeal;

++ the entire exercise of taking up stay application, even after the appeal was heard, was only done so as to collect some revenue before 31st March, 2018. Therefore, this appears to be a blatant attempt to retrace his steps by the CIT(A) only to collect revenue before 31st March, 2018. In fact, even if an order is passed on the appeal by the CIT(A) finding the submission of the Assessee not acceptable, either wholly or partly, it would result in the demand being sustained wholly or in part, which could then be collected in accordance with law. But the entire exercise, here, appears to be only to assist the Revenue to collect some amount of taxes prior to 31st. March 2018. This is certainly not expected of an Appellate Authority such as the CIT(A) who adjudicates disputes between the Revenue and the Assessee on a regular basis. The CIT(A) must not only be fair but appear to be so, in a country governed by Rule of law. In the absence of the same, the alternative remedy provided under the Act would be illusory leading to entertaining writ petitions by this Court, even if an alternative remedy is provided under the Act.

Assessee's Petition allowed