13 April 2018   

Scam Wham (Episode 3) | simply inTAXicating

CASE LAWS

2018-TIOL-686-HC-MUM-IT

PR CIT Vs JWC LOGISTICS PARK PVT LTD: BOMBAY HIGH COURT (Dated: April 11, 2018)

Income Tax - Section 80IA.

Keywords: Application of law - Container Freight Station - Infrastructure facility - Judicial discipline - Law of precedents - Real life disputes & Scarce judicial time.

The Revenue has preferred the appeal challenging the order passed by the Tribunal wherein, it was held that the Container Freight Station (CFS) run by the Assessee was eligible for deduction u/s 80IA as an infrastructure facility.

On appeal, the High Court held that,

Whether unnecessary wastage of the scarce judicial time by the Revenue on an already decided issue, only for the sake of argument, is unacceptable - YES: HC

++ the Counsel for the Revenue submits that the decision of this Court in the case of Continental Warehousing Corporation (Nhava Sheva) will not govern this case as that decision does not refer to a CBDT Circular/Clarification dated 6th January, 2011. At this, it was also pointed out that, specific reference to the board Circular/Clarification dated 6th January, 2011 has been made by this Court in Continental Warehousing Corporation (Nhava Sheva). On this being pointed out, he now states it has not dealt with the said Circular and therefore the decision is wrong. This Court point out to him that the Court was conscious of the Circular/ Clarification dated 6th January, 2011 when it passed the order in Continental Warehousing Corporation (Nhava Sheva) and has taken a decision on the Revenue's appeal after making a specific reference to the Circular/Clarification dated 6th January, 2011. Further, this Court also pointed out that the decision of the co-ordinate benches of this Court is binding upon this Court and any grievance which the Revenue has inrespect of Continental Warehousing Corporation (Nhava Sheva) is to challenge it before the Apex Court. Inspite of the said fact being pointed out to the Counsel for the Revenue, insists that decision of this Court in Continental Warehousing Corporation (Nhava Sheva) is wrong as it has not declared the Circular/Clarificaton dated 6th January, 2011 bad or not binding. Somebody must seek it before Court declares it to be so;

++ it is pained to record this most unreasonable attitude on the part of the Counsel for the Revenue of seeking to reargue settled concluded issues, without having obtained any stay from the Apex Court. This results in unnecessary wastage of the scarce judicial time available in the context of the large number of the appeals awaiting consideration. This Court expects the Revenue's Counsel to act with responsibility as an Officer of the Court and not merely argue for the sake of arguing when an issue is clearly covered by the decision of co-ordinate bench of the Court and take up scarce judicial time;

++ the Counsel must bear in mind that this is a Court of law and not an University/College debating Society, where debates are held for academic stimulation. This Court deal with real life disputes and decide them in accordance with the Rule of Law, of which an important limb is uniformity of application of law. This on the basis of judicial discipline and law of precedents.

Revenue's appeal dismissed

2018-TIOL-685-HC-MAD-IT + Story

CAVINKARE PVT LTD Vs CIT : MADRAS HIGH COURT (Dated: April 4, 2018)

Income Tax - Writ - Sections 220(6), 225(1) & 246.

Keywords: Financial constraints - Power of stay - Realization of tax - Tax demand.

The Assessee-company, has preferred the Writ petition challenging a communication sent by the Asst. CIT. The said communication was in reponse to the Assessee's request made for grant of stay of collection of the demand of tax in respect of the AY 2011-12. The Assessee in their letter, had pointed out that, as against the assessment order dated 30.11.2017, the Assessee had preferred appeal before the CIT(A), and the prospects of winning the appeal was very high and there were no lapses on the Assessee's part to disclose all the material facts truly and fully. The Assessee was undergoing financial constraints and if the demand was enforced, they will be put to undue hardship and the assessment was a high pitched assessment. However, the Asst. CIT by its disputed communication had informed the Assessee that there could not be any stay of the entire demand, but directed the Assessee to pay 20% of the disputed demand.

In Writ, the High Court held that,

Whether though the AO is not empowered to grant stay for recovery of tax, but has the power to postpone such payments - YES: HC

Whether the power of stay confers on the Appellate Authority u/s 251 can be equated to the power granted to the AO u/s 220(6) of the Act - NO: HC

++ the provisions of the Act does not specifically provided for a power with the AO to grant stay of his own assessment order on the ground that an appeal has been preferred against the assessment order. However, the AO is empowered to pass appropriate orders, not to treat the Assessee as a defaulter by considering the facts and circumstances placed before it. This distinction was succinctly brought out in the decision in the case of Paulsons Litho Works. It was pointed out that the Act confers power on the ITO u/s 220(6) to treat the Assessee concerned is not in default, during the pendency of an appeal u/s 246 or upon the TRO, u/s 225(1), to grant further time or postpone the payment of tax to be recovered is no substitute for the power of stay, which is considered by the Supreme Court to be a necessary adjunct to the very powers of the appellate authority;

++ it was pointed out that the powers conferred on the ITO and the TRO cannot be quoted with the powers of the appellate authorities, either in the nature, quality or extent or vis-a-vis the hierarchy. There can be no comparison on the same with each other, they being heterogeneous in nature. It was further, held that the power conferred on the ITO and the TRO cannot be considered to be either an effective substitute so as to render nugatory or destructive of the other. The undoubted power of an appellate authority to grant stay as an adjunct to its appellate jurisdiction, cannot be denied to such authority merely because another authority can grant somewhat similar result oriented relief, which is merely subjected to the process of coercive recovery for the realization of the tax or penalty under dispute;

++ the Asst. CIT cannot be stated to be totally denude of jurisdiction to entertain a prayer from the Assessee not to treat him as an Assessee in default. As pointed out in the case of Paulsons Litho Works, the power of stay confers on the appellate authority cannot be equated to the power granted to the AO u/s 220(6). It is no doubt true that the AO should first consider the Assessee's request for stay of the demand as referred to in the instructions/guidelines issued by the CBDT and directed 20% of the demand to be paid. The Asst. CIT did not afford an opportunity of personal hearing;

++ the disputed communication dated 07.02.2018, cannot be treated to be an order, as it appears to be a reply given to the Assessee's request for grant of stay of the entire demand. On facts, this Court finds that the Assessee has not filed a stay petition before the CIT(A), while filing the appeal on 25.01.2018. It is not known as to why the Assessee has not moved for stay before the appellate authority. Therefore, this is a fit case, where the Assessee has to approach the CIT by way of a stay petition. This so because, according to the Assessee, identical issue is pending in appeals for the earlier AYs and those appeals are pending before the CIT at various stages. However, the Assessee has not prayed for any stay in those appeals, because taxes have been remitted without prejudice. Thus, the Assessee has to necessarily move the CIT by way of a stay petition, and if such petition is moved, then it is open to the CIT to consider the prima facie case which the Assessee would place before the authority and take a decision on merits and in accordance with law;

++ hence, the disputed communication dated 07.02.2018, is directed to be kept in abeyance for a period of four weeks from the date of receipt of a copy of this order. Within such time, the Assessee is directed to file a stay petition before the CIT in the pending appeal dated 25.01.2018, and such stay petition shall be heard on merits and in accordance with law preferably within a period of three weeks from the date on which the stay petition is filed.

Assessee's Writ Petition allowed

2018-TIOL-684-HC-KAR-VAT + Story

BL KASHYAPAND SONS LTD Vs JCCT: KARNATAKA HIGH COURT (Dated: April 3, 2018)

Karnataka Value Added Tax Act - Writ - Sections 39(1), 39(2), 39(2)(e) & 63A(1)

Keywords - Re-assessment - Regular assessment - Revision of order

THE assessee-company, engaged in executing civil works contract for construction of buildings, was registered under the Karnataka Value Added Tax Act as well as the Central Sales Tax. The assessee was subjected to audit proceedings, pursuant to which the Deputy Commr. of Commercial Taxes passed an order of re-assessment, wherein returns filed by the assessee during the audit period were accepted and proceedings initiated u/s 39 of the KVAT Act were dropped. After this, a fresh re-assessment order was passed u/s 39(2) seeking recovery of certain ineligible input credit availed. The same was remitted by the assessee, with interest. Two more reassessment orders were passed for two separate periods, and the duty demanded was paid by the assessee with interest. Thereupon, the Deputy Commr. issued three more notices for separate tax periods, alleging that the claim of labour and like charges at 30% on the total contract receipts, which includes taxes collected and again allowing deduction towards taxes collected to arrive at taxable works contract receipts, had resulted in excess allowance of labour charges on the taxes collected which resulted in short payment of tax.

Upon considering the objections filed by the assessee, Deputy Commr. found merit in them and so the proposal made in the SCN was dropped. However, another notice u/s 39(2)(e) of the Act was issued by the Deputy Commr. to initiate re-assessment proceedings on the same ground of short payment of tax. The assessee submitted replies to the three reassessment notices. Thereupon, the Joint Commr. of Commercial Taxes invoked power u/s 63A and issued notice on the same ground of short payment of tax. On considering the assessee's submissions, the Joint Commr. passed orders revising the order passed by the Deputy Commr. Thereupon a rectification application filed u/s 69 by the assessee was rejected. Hence the present writ, challenging the order of the Joint Commr. u/s 63A(1) as well as the rejection of its rectification application.

On hearing the writ, the High Court held that,

Whether upon re-opening of assessment for a particular period, the order of regular assessment passed for the same period would cease to operate - YES: HC

Whether in such circumstances, an assessment order for a particular period which ceased to be in operation, can be revised - NO: HC

++ the main ground of challenge in these writ petitions is regarding the jurisdiction of the Joint Commr. to pass an order u/s 63-A[1] of the Act pending re-assessment proceedings u/s 39[2][e] of the Act. In this regard, considering relevant findings of the Apex Court in THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES v. H.R. SRI RAMULU and V. JAGANMOHAN RAO v. COMMISSIONER OF COMMERCIAL TAX AND EXCESS PROFITS TAX, ANDHRA PRADESH and M/s. KUNDAN LAL SRIKISHAN, MATHURA [U.P.] v. COMMISSIONER OF SALES TAX, U.P. AND ANOTHER, it is crystal clear that when once a notice is issued for the purpose of making reassessment, the assessment proceedings would be reopened and the order of assessment ceases to operate. In the present set of facts, notices for reassessment were issued u/s 39[2][e] of the Act by the Deputy Commr. on 25.06.2016 whereby the proceedings initiated u/s 39[2] of the Act were dropped. Thus, it can be held that once notice dated 25.06.2016 was issued by the Deputy Commr. to initiate reassessment proceedings, against the reassessment order dated 16.08.2014 passed u/s 39[2] of the Act, the said order dated 16.08.2014 ceases to operate, or in other words, it ceases to be in existence to revise the said order.

++ The Joint Commr. initiated the revisional proceedings by issuing notice dated 3.11.2016 to revise the order dated 16.08.2014 passed u/s 39[2] of the Act which has ceased to be operative on 25.06.2016 when notice was already issued by the Deputy Commr. u/s 39[2][e] of the Act. In the circumstances, it can be held that the proceedings initiated by the Joint Commr. u/s 63-A[1] of the Act is without jurisdiction and nullity in the eye of law. Hence for these reasons, the orders cannot be sustained and deserve to be quashed. Accordingly, the orders are quashed with liberty to the Deputy Commr. to proceed with the reassessment proceedings initiated u/s 39[2][e] of the Act in accordance with law.

Assessee's Writ Petition Allowed

2018-TIOL-549-ITAT-MUM + Story

BHIMRAO JANU JADHAV Vs ITO: MUMBAI ITAT (Dated: February 7, 2018)

Income Tax - Section 2(14)(iii)(b).

Keywords: Agricultural land - Categorisation - Non agricultural purpose - STCG.

The Assessee, an individual, filed return of income for the relevant AY. During the assessment proceedings the AO noted that the Assessee had not offered the profit earned on sale of piece of agriculture land and claimed exemption of STCG. Accordingly, the AO asked the Assessee to furnish detail about the claim in respect of exemption of profit earned on sale of said agricultural land. However, no detail was furnished by the Assessee and therefore, the AO treated the profit earned as taxable. Accordingly, the AO worked out the STCG on sale of such piece of land. Aggrieved by the order of AO, the Assessee filed appeal before CIT(A), however no relief was granted to the Assessee.

On appeal, the Tribunal held that,

Whether mere categorisation of a land as agricultural land in records because of past use for cultivation, is sufficient to prove character of such land as agricultural land - NO: ITAT

Whether therefore, use of land for non-agricultural purpose at the time of sale is a decisive factor and changes character of such land from agriculture to non-agricultural - YES: ITAT

++ the land was not an agricultural land when it was sold to M/s Effect Developer and to Hobert Josheph D'souza. The assessee had not filed any documentary evidence, to prove his intention to prove that the piece of land was purchased for cultivation or soon after purchases it from its previous owner or during the period it remained under his ownership it was used for cultivation. Even otherwise merely showing the land as agriculture in the land record and the use for agriculture purpose in remote past are not the decisive factors. The use of the land for non-agricultural purpose at the time of sale would change the character of the land from agriculture to non-agricultural. As observe earlier the assessee has not shown any such document to prove his bonafide claim for exemption. The scheme and object of exempting agricultural land from the definition of capital asset is give incentive to the person who are using the agriculture land for cultivation operations. Therefore, for the purpose of granting exemption, a restricted meaning has to be given to the expression 'agricultural land' as contemplated under section 2(14)(iii)(b). Further, to ascertain the true character and the nature of the land, it must be seen whether it has been put to use for agricultural purposes for a reasonable span of time prior to the relevant date of sale and purchase and further whether on the relevant date the land was intended to be put to use for agricultural purposes in the future;

++ the decisions relied by counsel for the assessee is not helpful to him as the facts of the present case are at variance. In Ashok Shukla Vs ITO the agriculture land was inherited by the assessee and his brother was carrying out agriculture operation. In Vanit Kumar Inderkumar Vs JCIT there was no dispute that land under sale was agriculture land and remained same at the time of sale. Similarly, in CIT Vs Debbie Alemao the land was shown in Revenue record for use of agriculture purpose and no permission was ever obtained for non-agriculture purpose under Land Revenue Code. Finally, in CIT Vs P.C.Joshi & Others the land in question in sale deed was described as agriculture land and there was no material on record to suggest that the land was put to non-agriculture land. Thus, the Tribunal do not find any infirmity in the order passed by Commissioner (Appeals).

Assessee's appeal dismissed

2018-TIOL-548-ITAT-DEL

ACIT Vs HARSH INTERNATIONAL PVT LTD: DELHI ITAT (Dated: March 16, 2018)

Income Tax - Sections 139, 143(2)

Keywords: Appellate proceeding - Assessment proceeding & Detailed finding.

The Assessee-company, engaged in the business of manufacturing of pan masala. The Assessee had filed its return u/s 139 for the relevant AY declaring nil income. The said return was again revised wherein, a loss of Rs.70,127/- was claimed by the Assessee. Accordingly, the Assessee's case was taken up for scrutiny and a notice u/s 143(2) was issued and thereby served upon the Assessee. Subsequently, a notice u/s 142(1) along with the questionnaire was also issued and served upon the Assessee. In reply, the Assessee had filed the details and information which were duly examined and considered by the AO. Consequently, the AO completed the assessment proceeding by making additions to the Assessee's total income. On appeal, the CIT(A) deleted the additions made by the AO.

On appeal, the Tribunal held that,

Whether when the CIT(A) has deleted the additions made by the AO by giving substantial findings and its observation, same calls for interferance - NO: ITAT

++ since, the CIT(A) has already given a detailed finding for each and every ground agitated by the Department after verifying all the documents given by the Assessee at the time of assessment proceedings and also at the time of appellate proceedings. In fact, the AO without giving proper finding and the observations has simply made the additions which was rightly deleted by the CIT(A). There is no need to interfere with the order of the CIT(A), therefore, this Tribunal uphold the order of the CIT(A).

Revenue's appeal dismissed